Capping prices or requiring advisers to benchmark recommendations against lower-charged substitutable products could have unintended consequences for consumers, insurer Aegon UK says.
An FSA discussion paper (DP) published in January includes the option of extending the existing RU64 rule, which requires advisers recommending non-stakeholder pensions to explain why the preferred policy is 'at least as suitable' as the stakeholder alternative, to other retail markets, particularly investments.
It also discusses price capping as part of a wider paper on product intervention, which the FSA says may be necessary to improve consumer protection.
In its response to the DP, Aegon said it is "generally not in favour" of price intervention and argued the RDR's required division of manufacturing and adviser charges further complicates the capping of prices.
"There is a real risk [price interventions] could create unintended consequences which in themselves can produce market conduct risks or broader consumer detriment," it said.
The "most obvious" example, Aegon said, is the stakeholder pension price cap and the associated RU64 regulations.
"While these interventions did drive down charges across the defined contribution pensions landscape, they also significantly reduced access to pensions advice, particularly for individuals."
According to Aegon, one major issue with price caps in a post-RDR world concerns the separation of responsibility for setting manufacturing and adviser charges.
"With the exception of vertically integrated firms, there is no longer any party with overall responsibility for overall charge levels or indeed shape," it said.
"We do not see any benefit in, or need for introducing, RU64 or ‘at least as good as' requirements around the manufacturing charges.
"As the FSA has decided not to require providers to police 'decency limits', we do support some form of high level principle which requires providers to consider at what level of charge a product is unlikely to deliver on its intentions.
"This might be preferable to a 'reasonable returns' test. We believe this assessment cannot be at individual policy level, but as a benchmark to identify and investigate trends of outliers."
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