Page last updated at 14:20 GMT, Friday, 9 April 2010 15:20 UK

Poor pension advice continuing, says FSA

Pensioners
Switching a pension is a key financial decision for many people

Some advisers are still giving poor advice to people about switching their pension funds, according to the Financial Services Authority (FSA).

It said that customers may be eligible for more than £150m in redress for the poor advice it had uncovered.

The work follows a major review of the sector by the FSA in 2008.

Advice on switching pensions can be offered to members of company pension schemes and people with private pensions plans.

'Tough action'

Some employers looking to reduce the risk of providing a company pension scheme can suggest that people move their pension funds elsewhere.

We will not hesitate to take tough action against any firms that fall below our standards
Dan Waters, FSA

A "pension switching" market has also built up offering advice to people who might get a bigger pension pay-out if they moved their existing privately held funds to a different scheme.

But the FSA said that it still had concerns about the advice being given and it was set to take enforcement action against six particular firms.

"Although many firms have changed the way they operate, we remain concerned that some continue to give poor advice," said Dan Waters of the FSA.

"Ignorance is no defence and we will continue to focus on the high risk firms through intensive supervision.

"We will not hesitate to take tough action against any firms that fall below our standards," he added.

Redress

In 2008 the FSA investigated the quality of advice on offer from a sample of 30 financial advisers and banks and subsequently wrote to 4,500 firms outlining its concerns.

Although most of them had improved their approach significantly, a few have not done so, which the FSA said was "not acceptable."

"Our initial work on pension switching advice identified a segment of poor performing firms and our follow-up work looked at a further sample of 22 firms considered to pose a higher risk of poor advice," the FSA said.

"Unfortunately, in this sample (which included independent financial advisers and banks), we continued to find high levels of unsuitable advice and little indication that these firms had embraced the need for change or dealt with any issues relating to past sales," it added.

In 65% of the cases the FSA reviewed at these 22 firms, the advice given was either unsuitable or unclear.

Two of the firms have already been punished for their failings and another four may be punished in due course.

The 22 firms under scrutiny are now likely to have to offer customers a total of more than £150m in compensation for past bad advice.

In its latest review, the FSA found problems with unjustified additional costs being charged to customers, and advisers not investigating customers' existing pension arrangements properly.



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