FSA review exposes poor advice on pension transfers
The Financial Services Authority (FSA) has been reviewing the quality of advice given to customers wanting to switch into a personal pension or self-invested personal pension (SIPP) plan.
The study focused on transfers since April 2006 from any registered pension scheme to a personal pension plan or SIPP, excluding transfers to group personal pensions, group SIPPs or stakeholder pensions.
The regulator reviewed 500 cases across 30 firms and found that standards were variable, with 16% of clients receiving unsuitable advice.
One quarter of firms involved were giving suitable advice consistently but for another one quarter of firms, a third or more of the cases reviewed were assessed as unsuitable.
The FSA is therefore writing to 4,500 companies that advise on pension transfers, setting out its findings and the standards it expects.
It is also outlining the action that should be taken to ensure customers receive suitable advice and has warned that it will undertake further assessments in the third quarter of 2009.
Where necessary improvements have not been addressed, the authority says it will take further action.
Several of the businesses involved in the review will be subject to enforcement investigation as a result of the failings already identified.
The FSA’s director of retail policy and conduct risk, Dan Waters, comments that switching into personal pensions and SIPPs is a complex area of business where consumers rely heavily upon advisers.
He adds that the main causes of unsuitable advice were: switches involving extra costs without good reason; recommendations that did not match the customer’s attitude to risk and their personal circumstances; failure to explain the need for, or put in place, ongoing reviews when these were necessary and loss of benefits from existing pension schemes without good reason.
Category: Financial Services Authority News, Insurance News
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