More than GBP150 million in redress but further industry action needed as FSA updates on pension switching
9th April 2010The Financial Services Authority (FSA) today published the findings of its follow-up work to improve the quality of pension switching advice. The findings will see a number of firms carry out past business reviews that will deliver more than GBP150 million in redress to customers.
The FSA's work has seen great improvement in the market with many firms reviewing past sales and procedures to deliver improved outcomes for customers. However, there remain a number of firms still giving high levels of unsuitable advice.
As part of a range of actions designed to improve the pension switching market, the FSA carried out further assessments of 22 firms that posed the highest risk of offering poor advice, following an initial thematic review in 2008. In total, six firms have been referred to the FSA's enforcement division as a result of work on pension switching, two of which have already been publicised.
In addition to failings previously identified, the FSA's follow-up work highlighted additional concerns. Some advisers were found to be offering 'portfolio advice services', where the additional costs were not justified for a particular customer; the FSA also saw examples of tied advisers not investigating a customer's existing pension arrangements.
Dan Waters, the FSA's director of conduct risk, said:
"The actions we have taken to raise standards have driven significant change in the market and will see large sums of money returned to customers who received poor advice. In fact, more than 10 per cent of all pension switching advice since April 2006 (A-Day) will be looked at again as part of the past business reviews firms are carrying out.
"However, although many firms have changed the way they operate, we remain concerned that some continue to give poor advice. Ignorance is no defence and we will continue to focus on the high risk firms through intensive supervision. We will not hesitate to take tough action against any firms that fall below our standards."
Since the original thematic review in 2008 the FSA has taken a wide range of actions to reduce the risk of poor advice being given. These included:
- Writing to over 4,500 firms (a 'Dear Compliance Officer' letter) setting out the standards the FSA expects of firms;
- Publishing a pension switching suitability assessment template to provide firms with a resource to assist them; and
- Hosting 18 regional roadshows, attended by 1,500 small firms, providing further guidance and support in light of the thematic review's findings.
