The Work and Pensions select committee has told the Financial Conduct Authority to “widely publicise” its list of unauthorised firms and to review the resources it dedicates to pension scams.
In its report on pension costs and transparency, published today (August 5), the MPs noted that defined benefit pension transfers and self-invested personal pensions were a matter of concern.
With latest reports indicating “that £2bn was lifted out of pension savings by unscrupulous advisers in one year alone,” the committee was concerned to hear that the FCA’s dedicated scams team only consisted of approximately 10 people, out of 3,700 staff.
In March, Andrew Bailey, the regulator’s chief executive, said that pension scams investigations made up a "significant proportion" of the work being done by staff in the enforcement, regulatory and retail investigations division, and that the number of people working in this area changed according to necessity.
The MPs are recommending that the regulator reviews “whether it dedicates sufficient resource to combat active pension scams, prevent new pension scams and protect individuals”.
The committee also stated that the watchdog’s list of unauthorised firms should be expanded into a widely publicised database.
“This database should be regularly updated by the range of governmental organisations involved in pension scams and act as a coordinated early warning system,” the MPs said.
Despite recognising that many IFAs provide good value for money for pension customers, the MPs noted that the number of people paying for good value advice was low.
Savers who aren’t able to access good advice “need guidance and effective protection from pension scams, which can have life changing impacts”, they said.
In the report, which also called for a 0.75 per cent cap on investment pathways and a review of the charge cap in accumulation, the MPs said they were “unconvinced” that the industry will rise to the challenge of providing clear, transparent information about the costs and charges of investments.
They said the government and regulators shouldn’t wait for the “industry to fail to act voluntarily as they have so many times in the past”, and should instead move now to legislate for mandatory disclosure to a set format, for both defined contribution and DB schemes.
Better scrutiny of value for money in defined benefit schemes will also either justify or avoid the need for the difficult decisions being taken about the future of those schemes, they added.
According to independent MP Frank Field, chairman of the committee, “ripping off pension savers could be eliminated”.
He said: “The select committee is calling on the government to shine the searchlights into that part of the financial industry that has settled down to misinforming, mischarging, overcharging and making a fat living off the hard-earned savings of pensioners.
“Government and regulators should not wait for the industry to fail to act voluntarily as they have so many times in the past. It must put the full force of the law behind such changes.”