12th Oct 2018
The independent MP Frank Field, chair of the Work and Pensions Committee, has accused the Financial Conduct Authority (FCA) of failing to tackle rogue pensions advisers.
Field said that the City regulator should have banned contingent selling fees, which can give advisers an incentive to offer poor advice to customers who are seeking pension saving expertise.
The FCA issued its final rules on transfers of defined benefit pensions on 5 October, which included some new safeguards. However, it failed to put an end to contingent fees.
Given that a supposedly independent financial advisor is only paid if they advise a customer to switch their pension into another scheme, the fees create a conflict of interest between the client’s best interests and the adviser’s potential financial gain.
The Work and Pensions Committee found that tens of thousands of customers faced losing large parts of their savings due to poor advice.
In February the committee also called on the FCA to act urgently on the issue in the wake of a major miss-selling scandal, which saw thousands of savers in the British Steel Pension scheme “shamelessly bamboozled” out of their defined benefit schemes by “dubious” advisers and “parasitical” introducers.
Field said: “Pensioners were swindled out of their savings yesterday, are being swindled out of those funds today, and still will be tomorrow.”
He also accused the FCA of burying the issue “in the long grass, even as unscrupulous advisers are circling like vultures around consumers.”
The FCA said that contingent selling fees were a “complex area” and that the payments were not the principal cause of bad outcomes for clients.
Christopher Woolard, FCA's Executive Director of Strategy & Competition added: “Any changes to our rules on contingent charging could have implications for the supply of advice.
“Because of the significance of this issue to all stakeholders in the market, we will carry out further analysis and consult on new interventions if appropriate in the first half of next year.”