Out-Law News 2 min. read
23 May 2014, 10:00 am
The Financial Conduct Authority (FCA) has issued a consumer alert in response to "evidence" of such offers being made by unauthorised firms, some of which were claiming to represent the government after its recent announcement that it would introduce free retirement guidance. In many cases, these callers were persuading savers to move their money to a higher-risk self-invested personal pension (SIPP) or a small self-administered scheme (SSAS), it said.
"If you see or receive offers of 'free pension reviews', just ignore them," the FCA said in its alert. "If you are called out of the blue to discuss your pension, just hang up ... Most of the companies making these offers are not authorised by us, though they often falsely claim they are acting on our behalf."
"Authorised financial advisers offering advice that is impartial and in their clients' best interests are very unlikely to cold call offering their service. Professional advice on pensions is not free," it said.
The regulator said that the investments being offered to consumers by unauthorised firms could be high risk, unreliable and difficult to sell. In addition, consumers that lost money as a result of dealing with an unauthorised adviser would generally not be able to complain to the Financial Ombudsman Service (FOS) or claim compensation through the Financial Services Compensation Scheme (FSCS), it said.
The consumer alert was published just weeks after the FCA issued a second warning to product providers to ensure that customers purchasing SIPPs and similar projects were receiving advice on the suitability of the underlying investment and not just the product itself. Earlier this week, the FOS revealed that it received almost twice as many complaints from consumers in relation to SIPPs this financial year as it had in 2012/13; and that 78% of those complaints were resolved in favour of the consumer.
A SIPP is a type of personal pension plan which allows individuals to choose how their savings are invested from the full range of investments approved by the UK government and tax authorities. They tend to be particularly attractive for higher paid individuals as they can deliver better returns. However, they typically involve investments in higher-risk, unregulated products such as overseas property developments, forestry and 'store pods' according to the FCA, which has previously set out its concern that consumers purchasing these products do so without sufficiently understanding the risks.
From April 2015, the government intends that members of defined contribution (DC) schemes would be able to access their savings in any way that they wish from the age of 55, without necessarily having to buy an annuity or facing heavy tax penalties. The plans would be backed by a new legal duty on pension providers and trust-based pension schemes to offer free and impartial face to face financial guidance at the point of retirement; however, the government has said that this advice would not necessarily be 'independent' as defined by the FCA.
Pensions expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that it was "in the interests of the pensions industry that savers receive appropriate advice" before the new flexibility was introduced.
"If rogue advisers are allowed to mislead savers, the world of pensions risks being tarnished against - just at a time when the government and the regulators are pulling out all the stops to increase consumer confidence," he said.
"Government and the regulators need to take appropriate steps now to reduce the risk of rogues undermining the efforts of everyone else in the pensions industry," he said.