Stephen Lloyd MP has called on the secretary of state for work and pensions to investigate the pensions transfer market and ban contingent charging.
Writing to Amber Rudd, the MP for Eastbourne who is now independent after quitting the Liberal Democrats in December over Brexit, has suggested the pension transfer market is ‘broken' and needs to be fixed.
It comes after the Financial Conduct Authority (FCA) found less than half the pension transfer advice reviewed is suitable, and more than half of consumers are not receiving the right advice, based on information collected over 2018.
In his letter to Rudd Lloyd: "I'm writing to express my profound concerns in light of the recent findings of the FCA. This is a shocking figure and, frankly, represents nothing less than a total market failure."
He urged Rudd's department to explore a ban on contingent changers from IFAs, which he has previously supported and which MPs yesterday (January 8) launched an inquiry into.
He added that such a ban is the only way to align adviser and consumer interests.
"In order to be able to put the consumer first, we must ensure their economic interests, and those of the financial advisers are properly aligned."
Pension transfers have been the focus of MPs and the regulator in recent years, particularly after the British Steel Pension Scheme fiasco.
In November, the FCA sent a market-wide survey to all firms with pension transfer permissions. The questionnaire asked firms how many clients the firm had advised to transfer their DB pension, as well as what percentage of the firm's income was derived from pension transfers.
What is more, in a consultation paper issued last March, the Financial Conduct Authority (FCA) revealed it was considering whether to implement a ban on contingent charging for pension transfers.
The regulator said: "Given the potential harm to consumers, we are considering if it is necessary to intervene in the way charges are levied for pension transfer advice. This could mean a ban on contingent charging."
After receiving a variety of responses to its consultation, the FCA in October said: "The evidence it [the FCA] has seen does not show that contingent charging is the main driver of poor outcomes for customers", which ultimately resulted in the regulator putting a pin in any plans to ban the charging structure.
This week, however, MPs have brought the debate back into the spotlight by launching an inquiry into contingent charging on DB transfer advice.
Tim Shepherd and Beth Brown look at the legal implications of working from home and how pension professionals can mitigate the risks.
Nearly every trustee is confident of the next stage in their scheme’s strategy, despite almost an equal number being forced to consider replacing plans within the prior 12 months, according to research by Barnett Waddingham.
Companies could be overstating their pension liabilities by up to £60bn due to their life expectancy assumptions, according to XPS Pensions Group.
Defined benefit (DB) schemes that provide GMPs must revisit and, where necessary, top-up historic cash equivalent transfer values (CETVs) that have been calculated on an unequal basis, a landmark court judgment said last week.
Regulators must act now to impose some "proper regulation" to stop another defined benefit (DB) transfer advice disaster, saysTim Sargisson.