Adviser value for money under the spotlight in MPs’ pensions inquiry

By Hope William-Smith

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Aug 10, 2018

The work and pensions select committee will examine if pension customers get value for money from advisers, in a new inquiry launched today.

The inquiry is seeking to find out the transparency of the pensions industry when it comes to charges, investment strategy and performance.

The inquiry will look at whether enough is being done by the industry to make sure savers:

  • Get value for money for their pension savings;
  • Understand what they are being charged and why;
  • Understand the short- and long-term impact of costs on retirement outcomes;
  • Can see how their money is being invested and how their investments are performing;
  • Are engaged enough to use information about costs and investments to make informed choices about their pension savings; and
  • Get good-value, impartial service from financial advisers.

The background notes to the inquiry cite research from the FCA last year that showed only 47 per cent of defined benefit transfer advice met its suitability standards.

The inquiry says: “The FCA recently told us it has 33 open investigations into financial advisers suspected of having misadvised pension transfer clients, and have additionally banned four financial advisers.”

The FCA will be expected to report back on whether the use of contingent charging by advisers gives rise to an “inherent conflict of interest”.

Submissions on eight questions will be open until 3 September, with findings to be followed by an FCA policy statement on pension transfers in Autumn.

The inquiry follows the government’s earlier review into the pension freedoms and choice reforms.

Inquiry questions

1. Do higher-cost providers deliver higher performance, or simply eat into clients’ savings?

2. Is the Government doing enough to ensure that workplace pension savers get value for money?

3. What is the relative importance of empowering consumers or regulating providers?

4. How can savers be encouraged to engage with their savings?

5. How important is investment transparency to savers?

6. If customers are unhappy with their providers’ costs and investment performance/strategy, are there barriers to them going elsewhere?

7. Are Independent Governance Committees effective in driving value for money?

8. Do pension customers get value for money from financial advisers?

Source: Work and Pensions Committee

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