The Consumer Panel has hit out at the regulator for not demanding firms directly contact up to 120,000 people potentially mis-sold in contracting out of the State Second Pension (SERPS/S2P).
The FSA announced today it has found no evidence of widespread mis-selling following its two-year investigation into contracting out of SERPS, but did identify a small group of consumers who may be at a higher risk of having been mis-sold.
Of eight million cases, the regulator says only 1.5%, or 120,000 people, have been potentially affected, and will publish a step-by-step guide later this month so people can identify for themselves where grounds for complaints may exist.
But the Consumer Panel (FSCP) says it is unfair to place the onus on individuals who may have lost as much as £7 per week in retirement to find out this information for themselves.
It says the FSA should insist on firms writing to these people with a personalised illustration of how it has affected their pension, and claims it is “disappointed” in the regulator.
John Howard, chairman of the FSCP, says: “It may be only a small proportion, but those people need to understand that they may have been missold, and see how it has affected their own pension, so they can decide whether to take action.
“The FSA's plan to provide information on its website leaves it to consumers to take the initiative to work out if they should look for the information, rather than showing them the potential loss to stimulate action.”
The FSA launched its investigation in early 2005 after concerns were raised about sales standards in relation to Appropriate Personal Pensions (APPs) sold since 1988 - the policies used to contract out.
The investigation involved analysis of firms' sales practices and quality controls in the context of the regulatory standards that existed at the time of those sales.
As a result of that work, the FSA has concluded that there is no evidence of widespread mis-selling.
The FSA's investigation identified around 1.5% of sales out of the eight million APPs sold where the consumers were above the industry-set 'pivotal ages'.
As many such sales were not typical practice at the time, the FSA says it is possible these consumers may have been wrongly advised to contract out.
However, the regulator says there are reasons why it may have been appropriate for them to do so even if they were above the pivotal age.
For example, some consumers may have wanted the option to leave their pension savings to their dependants if they died before retirement, or they may have preferred control over their investments rather than relying on government pension policy.
Vernon Everitt, director of retail themes at the FSA, says: “We have conducted an extremely thorough investigation and analysis of this issue and found no evidence of widespread mis-selling of policies used to contract out of SERPS/S2P.
“For the 1.5% of sales to consumers who were above the pivotal age, our step-by-step guide will help them to understand if they are affected and, if so, what to do next.
“We will also continue to follow up issues with individual firms as part of our continuing supervision of them.”
The consumer guide will be available towards the end of May on www.moneymadeclear.fsa.gov.uk or from the Consumer Helpline on 0845 606 1234.
In addition, a report about the investigation of sales of Appropriate Personal Pensions will be published at the end of May.
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From 6 April 2019