AJ Bell has blasted the Financial Conduct Authority’s proposals for non-advised pension transfers, warning they are ‘anti-consumer’ and ‘anti-competitive’.
Under the proposals, firms receiving pension transfer requests will be required to gather information from the person’s old scheme and present it to them before initiating the transfer. According to the FCA, the reforms will allow people to more easily and accurately decide whether a transfer is in their long-term interest before reaching a decision.
It said few consumers who transfer consider factors such as fees and charges, investment choices, decumulation options, or potential loss of guarantees or benefits.
Through its proposals, the regulator said it aims to help consumers identify if any valuable benefits will be lost on transfer and how ceding and receiving schemes compare.
However, AJ Bell CEO Michael Summersgill said they represent the “worst kind of regulatory intervention.”
He said: “These proposals are anti-consumer and anti-competitive. Without presenting any clear justification whatsoever, the FCA has set out plans to shut down consumer choice and put barriers in the way of people who do the right thing and engage with their retirement finances. This is all the more baffling given the regulator has spent years rightly focused on improving pension transfer times.
“To make matters worse, these proposals will only apply to pensions regulated by the FCA, meaning the proposed 10-day time limit for firms to provide the information needed to process a transfer will not apply to workplace pension schemes that don’t come under the FCA’s remit. Ironically, this is where some of the worst offenders when it comes to slow pension transfer times reside.
“This is a classic case of a solution looking for a problem that simply does not exist.”
Summersgill said there are very few policies that contain guaranteed benefits that could be lost during a transfer and pointed out that pension finding services often used by people consolidating retirement pots typically flag these to customers.
“The contrast between this ill-thought-out intervention and the measured, collaborative, evidence-based approach taken by the regulator to targeted support reforms is glaring.
“The FCA needs to go back to the drawing board here and engage with firms on solutions that do not risk causing substantial consumer harm through delayed transfers.”
AJ Bell believes the FCA, Department for Work and Pensions and The Pensions Regulator should work together on developing alternative solutions to ensure pension savers with valuable guarantees and protections fully understand their benefits and the risks of losing those through transfers.
This could include regular communication, such as an annual benefit statement, or in the longer term as part of the information held on Pensions Dashboards, the investment platform said.
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