The Treasury Select Committee has backed government plans to launch a range of ‘lighter touch regulation' Sandler products, providing they are sold using the FSA's basic advice regime to counter the prospect of consumer ‘mis-buying'.
Details of the TSC report - on confidence in the long-term savings industry – says it notes the concern of representatives from both industry firms and consumer bodies about the sale of products without any form of advice particularly where equity-based products are sold, so the TSC backs current testing by the FSA of a reduced or basic advice process which takes 30-40 minutes to complete on sale of a pension.
At the same time, the TSC suggests it should still be the responsibility of financial services firms to ensure consumers are given access to the FOS complaints procedure.
“The Committee hopes that the basic advice process now proposed for Sandler products will go some way towards meeting the fears of consumer groups and others that the new simplified process would see large scale mis-selling with little prospect of consumer redress. We note that firms will still be expected too establish the basic suitability of a product for the client and that the client will have the right of appeal in any dispute to the Financial Ombudsman Service,” says chapter seven on Sandler products.
There appeared to be mixed opinions as to the level at which price caps should be implemented, as evidence given by a variety of companies – such as Invesco, B&CE and L&G – said it was possible to deliver products under a 1% cap whereas other bodies such as the ABI pointed out the price cap imposed by the UK government is lower than that set anywhere else in the world.
Rather than throw out the new 1.5% cap proposed by the government, the TSC says it is “disappointed” part of the charge “is not more clearly linked to the investment performance of the products”.
Moreover, the TSC also argues should be placed on existing stakeholder pension holders, as the additional 50 basis points being allowed on stakeholder products is designed to cover the cost of additional cost in the selling process.
“It would clearly be unfair for product providers to levy the higher charge on existing stakeholder pension contracts,” says the report.
The TSC also suggests price caps should be set and monitored by an independent body, as consumer bodies argued in their evidence to TSC members the price cap is currently being set according to ‘who has the loudest voice’ in the lobbying process.IFAonline
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