Independent MP Stephen Lloyd has called on the secretary of state for work and pensions to investigate the pensions transfer market and ban contingent charging.
Writing to Amber Rudd, the MP for Eastbourne has suggested the pension transfer market is ‘broken’ and needs to be fixed.
It comes after the Financial Conduct Authority (FCA) found less than half the pension transfer advice reviewed is suitable, and more than half of consumers are not receiving the right advice, based on information collected over 2018.
In his letter to Rudd, Lloyd said: “I’m writing to express my profound concerns in light of the recent findings of the FCA. This is a shocking figure and, frankly, represents nothing less than a total market failure.”
He also urged Rudd’s department to explore a ban on advisers using contingent charging.
He added that such a ban is the only way to align adviser and consumer interests.
“In order to be able to put the consumer first, we must ensure their economic interests, and those of the financial advisers are properly aligned.”
Pension transfer regulation
Pension transfers have been the focus of MPs and the regulator in recent years, particularly after the British Steel Pension Scheme fiasco some 12 months ago.
In November the FCA sent a market-wide survey to all firms with pension transfer permissions. The questionnaire asked firms how many clients the firm had advised to transfer their DB pension, as well as what percentage of the firm’s income was derived from pension transfers.
What is more, in a consultation paper issued last March, the Financial Conduct Authority (FCA) revealed it was considering whether to implement a ban on contingent charging for pension transfers.
The regulator said: “Given the potential harm to consumers, we are considering if it is necessary to intervene in the way charges are levied for pension transfer advice. This could mean a ban on contingent charging.”
After receiving a variety of responses to its consultation, the FCA in October said: “The evidence it [the FCA] has seen does not show that contingent charging is the main driver of poor outcomes for customers”, which ultimately resulted in the regulator putting a pin in any plans to ban the charging structure.
This week, however, MPs have brought the debate back into the spotlight by launching an inquiry into contingent charging on DB transfer advice.