FSCS ‘best practice’ proposal gets provider backing
20 March 2018
Aegon has backed the development of ‘best practice’ communications material by the Financial Services Compensation Scheme (FSCS) to provide consumers with a better understanding of the protection the scheme offers.
The pension specialist said an industry best practice standard will create “greater consumer confidence” in retirement products and advice.
Aegon’s support follows the results of a large-scale experiment, undertaken by the FSCS and published in the research report The need to know: FSCS protection makes a difference, was designed to explore a link between the choices people make in retirement and their awareness of FSCS.
The experiment, in which more than 2,000 people participated, showed that people who are aware of FSCS are less inclined to buy riskier products and more inclined to opt for those the scheme protects.
People who are aware of FSCS or feel it is important, are also more likely to take advice and less likely to question the price of that advice, the study found.
In response, the FSCS said a group representing industry firms will work together to develop an industry best practice standard for disclosure, which will offer a benchmark on how life and pensions product providers convey information about FSCS to consumers.
Mark Neale, FSCS chief executive, said: “This will not be a quick fix but we are confident that, just as we have in the deposit industry, we will arrive at a disclosure standard which will significantly improve consumer understanding and make it easier for providers to communicate where FSCS’s guarantees apply to retirement products.”
Steven Cameron, pensions director, Aegon said: “The FSCS offers customers valuable protection where a firm is found at fault and doesn’t have the funds to compensate affected customers. As well as benefitting those customers who receive compensation, the scheme offers the industry a wider benefit as it gives consumers more confidence in financial services, knowing they’ll be compensated even if the responsible firm is no longer in business. But to maximise this wider benefit, we need to make sure people clearly understand what the scheme provides.”
The scheme is currently paid for by levies on firms, such as financial advisers. However, Aegon said providers and intermediaries share the “wider confidence benefits” and as such believes providers should pay a greater share of intermediary levies.
“The research highlights a welcome added bonus, finding those who are aware of the FSCS are more likely to seek advice on their retirement decisions. The pension freedoms have proven very popular with retirees, but with critical and complex choices to make, professional financial advice is needed more than ever,” added Cameron.
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