Synopsis: A summary of the Treasury Select Committee (TSC) view on pension’s reform and the role of the FCA. There is clear concern over the potential for mis-selling and consumer detriment.

Date posted: Tuesday, May 13, 2014

The Treasury Select Committee (TSC) has published its report on the 2014 Budget.

A summary of the TSC thoughts on pension products is as follows:

The market is likely to adapt, offering a new range of financial products for those approaching retirement. It is crucial that these products are not defective. Were they to be so, the reputation of the financial services industry, which has suffered severe damage in recent years from large scale mis-selling, would be further tarnished.

The FCA has now been given new powers to intervene early, in advance of detriment occurring. In practice, this will be extremely difficult to accomplish without creating other forms of consumer detriment. In particular, it will be essential to avoid stifling market innovation. The use of these new powers will be a major test of judgement-based regulation.

Chairman’s comments

‘The pension’s reforms are likely to lead to financial innovation.

That innovation needs to provide products that are in the interests of consumers and which are sold responsibly.

Following the financial crisis, and the mis-selling scandals, the reputation of the industry is under scrutiny.

The FCA, with its new powers of intervention, will also be under the spotlight. This will be an important test of its commitment to develop judgement-led regulation. Consumers will lose from heavy handed regulation or the extension of the box-ticking culture that has bedeviled conduct regulation. This achieved little and often protected nobody. Effective regulations are badly needed, encouraging innovation, but the FCA must also act quickly to bear down on consumer detriment where necessary.’


That there is “official” concern is to be expected and those developing products for this market – both inside and outside of a traditional pensions/annuity wrapper will have this very firmly in mind. Ensuring consumer understanding of any risk associated with new, non-annuity solutions will be a prime pre-requisite of course.

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