Financial Services Compensation Scheme  

FSCS chief reveals how to boost demand for advice

FSCS chief reveals how to boost demand for advice

People might be more inclined to take financial advice if they were aware of the existence of the Financial Services Compensation Scheme, the organisation's chief executive has said.

Mark Neale said the FSCS had recently conducted research which found only around half of people realised the scheme protected pensions at all.

Consumers would only be a little wiser about FSCS protection if they went through an adviser or a provider, the compensation scheme's research revealed.

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But Mr Neale said the research also found almost three out of 10 people would contribute more to their pension – around £1,500 a year on average – if they knew their pension was protected.

He said: "Our research clearly suggests that awareness – or lack of it – does affect consumers’ behaviour – and not to their benefit.

"It is at least a reasonable hypothesis that better information about FSCS would help to promote higher levels of retirement saving.

"All this amounts, in my view, to a strong case for FSCS working in partnership with the industry to raise awareness of our protection of retirement savings.

"It is very much in the interest of firms themselves to do so because, with that added assurance, consumers may increase their retirement saving. Consumers may also be more inclined to seek independent advice."

The FSCS's research also found only about one person in 20 knew it protected 100 per cent of the value of life policies and annuities without limit.

Mystery shopping carried out for the FSCS found that in 60 per cent of cases the shopper had to prompt the firm for information about FSCS protection. 

Only 10 per cent of shoppers came away with a good understanding of what it protected, the compensation scheme's mystery shopping exercise.

Mr Neale said: "I also recognise, of course, our protection for retirement savings is a lot more complicated to explain than that for bank deposits – we protect different products at different levels for a start. 

"But that is exactly why we need to work with the industry to ensure that consumers receive good explanations when they investigate and buy financial products.

"Raising awareness of our protection in partnership with the industry will be a key strand of our strategy for the 2020s."

Clayton Cumming, a partner at Advice & Wealth Management Solutions, said: "We have a general discussion around the protections available through a pension and I have never come across it has an obstacle.

"It is definitely something advisers should tell their clients about."