UK - The UK's Financial Services Authority is increasing its focus on the advice given to pension policyholders when switching to another provider, as its investigations have found members are still receiving a high level of "unsuitable advice".
The true picture suggests some pension advisers are being paid for ‘portfolio advice services' where the additional costs were not justified, according to the FSA, while other types of limited offering retail market pension advisers, known as tied advisers, were simply not giving any advice on what to do with a person's existing pension plan.
The FSA said 10% of all pensions switching advice given since 6 April 2006 - also known as pensions A-Day - will be reassessed and at least £150m (€170m) will be paid in compensation to clients once firms have conducted reviews of their past business because the advice members were given was inappropriate, and clients were therefore financially inconvenienced.
Much of the advice being discussed is considered to be retail financial advice but can affect company-based defined contribution pension members too as retail advice is given direct to the member.
The regulatory division is not that clear, however, as the UK pensions industry has two supervisory regulators, depending on the style of the pension fund and the activities deployed.
The Pensions Regulator (TPR) is largely responsible for monitoring defined benefit occupational pension plans, considered to be institutional investors, but has a growing focus on defined contribution arrangements.
In contrast, the Financial Supervisory Authority largely regulates activity around contract-based insurance pension plans which can be taken up by individuals as retail investors but are often offered by companies as group pension arrangements.
Part of the FSA's next step in activity will be to publish a pensions switching suitability assessment template for companies to work from when advising on any such changes, according to Dan Waters, the FSA's director of conduct risk.
"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."
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