MPs on the Work and Pensions Committee have welcome the FCA’s Retirement Outcomes Review but attacked progress on reform as “glacially slow.”

The FCA yesterday published its Retirement Outcomes Review into the way the Pensions Freedoms are affecting pension savers three years after their introduction.

The review concluded that while many consumers have welcomed the changes a package of measures was needed to tackle adverse outcomes for some consumers. The FCA also said it was considering a cap on pension drawdown fees to avoid abuse among a number of measures (see other stories on Financial Planning Today).

Work and Pensions Committee chair Frank Field MP said the FCA need to act now to help consumers and not just carry out yet more consultation.

He said: “The FCA reports devilishly glacial progress, albeit now in the right direction. Report after report shows that inadequate protections are in place for too many savers.

“Yet again, the FCA has found that people are losing out in tax and investment returns by hiding their pensions in cash bank accounts. Yet again, the FCA has found that people are being ripped off by unjustifiably high and complex charges.

“But the FCA wants another year to mull over a charge cap while life savings are shamelessly milked. There has been more than enough warning. They should just introduce it.

“We are pleased that the FCA is taking forward many of our recommendations. Single page pension passports are of proven benefit to consumers. Consumer-friendly investment pathways for drawdown customers, overseen by independent governance committees, would rightly be widely welcomed.

“We hope and expect the FCA will announce a ban on contingent charging for transfers in their autumn report. Their instincts are right. We just want them to get on with it.”

Committee MPs have conducted a series of inquiries into the operation of the freedoms, and made recommendations for protecting retirement savers against scammers, as well as creating a new, low cost default decumulation pathway.

 MPs noted a number of findings from the review:

•The FCA findings show that charges are on average higher than during accumulation – there appears to be no valid defence for that.

•Average total charges vary between providers from 0.4% to 1.6%.

•Products can have as many as 44 different charges linked to them.

•The FCA says that “firms should challenge themselves on charges and use 0.75% on default arrangements in accumulation as a point of reference.  But the FCA wants to give providers a year if and when investment pathways are introduced. The Committee recommended a 0.75% cap in its report.

The Committee also said risk aversion in pension freedoms continued to be a major problem and there is weak competitive pressure with 94% of consumers who accessed their pots without taking advice accepting the drawdown option offered by their pension provider.

Members of the committee comprise: Frank Field - Chair (Labour), Heidi Allen (Conservative), Jack Brereton (Conservative), Alex Burghart (Conservative), Neil Coyle (Labour), Rosie Duffield (Labour), Ruth George (Labour), Steve McCabe (Labour), Nigel Mills (Labour), Chris Stephens (Scottish National Party), Justin Tomlinson (Conservative).