MP: Guinea pig retirees could be exposed to mis-selling scandal

Retirees will become "guinea pigs" threatened by the "real possibility of another mis-selling scandal" when the pension reforms come in next April, an MP has claimed. Shadow Minister for Employment Stephen Timms fears that unless extra safeguards are built into the new system consumers will be left exposed.He told a House of Commons debate yesterday they are in need of more protection.He said: "If in practice only a tiny proportion of people, or even a modest proportion, take up the guidance being offered, there is every chance of very serious problems in this market in the future. The House cannot be satisfied with that likelihood. {desktop}{/desktop}{mobile}{/mobile} "A number of organisations have pressed vigorously for a second line of defence requirement and they make a telling case. Proceeding without that safeguard will leave many consumers exposed—we should bear in mind that this is all supposed to happen from next April—making people guinea pigs and opening up the real possibility of another mis-selling scandal in the coming months." He admitted he did not have a proposal on how to form the "second line of defence" but said he hoped the FCA would consider it. He also suggested that the reforms were happening too fast, saying "there is a danger, in providing so little opportunity for the House to conduct proper scrutiny, of creating serious problems and a future mis-selling scandal." He cited the annual workplace pension survey carried out by the National Association of Pension Funds this year showing that only 19% of savers feel very capable of knowing what to do with their savings. He said: "We can be certain that consumer bewilderment will rocket from next April. The new arrangements are supposed to be in place from that date—in less than six months—but we do not yet know how they will work." He added that "nobody can yet feel confident about what will emerge" on the development of the guidance service by regulators and the Government. Pensions Minister Steve Webb said the "second line of defence" was an "important concept". He said: "What happens when people have not accessed the guidance, or indeed if they have? The FCA has committed to consider this issue and it will be publishing an update on its requirement on pension providers very shortly. "We have had some discussions as to whether that will be by Christmas, by winter or by late autumn, but it will be very shortly, so we will have more information on that. I assure the House that the FCA is taking this issue seriously." He insisted that more people would take up the offer of retirement guidance than the doom mongers suggested. He said: "The Legal & General pilot, which was mentioned, had a 2% or 3% take-up, but the Chartered Insurance Institute explained it to people and told us that demand could be as high as 90%. "I am confident it will be in the latter range. It is important to stress, however, that we are evolving—a theme to which I shall return in a moment. This is work in progress. "We are talking to people in this target group about what they want from the guidance; using behavioral insights to maximise take-up; and trying to find out what people want from the sessions and what means of communication work for them."

MP: Guinea pig retirees could be exposed to mis-selling scandal

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