MPs on the Work and Pensions Select Committee have opened a new inquiry to look solely at contingent charging on defined benefit (DB) transfers.
The inquiry follows on the Committee’s pension freedoms inquiry, which featured ‘worrying evidence’ about advice given to British Steel Pension Scheme (BSPS) members.
Now the Committee is asking for evidence for its new inquiry, which will look at contingent charging and any ‘unintended harm’ this charging structure is having on consumers.
Chair of the Committee Frank Field (pictured) said: ‘The FCA (Financial Conduct Authority) has confirmed to me it shares many of the Committee’s concerns about the scourge of contingent charging. But to tackle this, and to protect consumers from the vultures circling around their pension pots, it needs more proof of what is really happening to people.
‘It has explained to me the complexities of contingent charging, and how it needs to carefully consider its possible interventions so as not to cause unintended harm, particularly to vulnerable customers. The FCA has said it would welcome the Committee’s help to find out more, and we’ll be happy to do everything we can to make sure we get the right safeguards in place.’
However, last October the FCA decided against going ahead with a ban following a consultation. The regulator said it was difficult to find evidence that showed contingent charging was a cause of unsuitable advice.
Call for evidence
The Committee’s call for evidence is asking for consumers’ experiences of receiving DB transfer advice and the charging structure of that adviser.
It is also asking for responses to the following questions:
- Does contingent charging increase the likelihood of unsuitable advice?
- What would be the impact of a ban on contingent charging on consumers and firms and how could any negative effects be minimised?
- Are there any alternative solutions that would remove conflicts of interest but avoid any possible negative impacts of an outright ban on contingent charging?