Firms ordered to redress £150m as pension switching probe continues

Ongoing FSA investigations into poor pension switching advice are expected to result in firms paying out more than £150m in redress to customers.

The regulator has ordered 10 firms to review past sales and procedures as part of the regulator's clamp-down on unsuitable advice, but it is looking at 22 individual businesses in total.

RSM Tenon Financial Services was recently fined £700,000 for "significant failings" in its pension-switching advice and sales processes, as well as over sales of Lehman-backed structured products.

Director of IFA firm Financial, Charles Palmer, was also fined £49,000 by the FSA for management failings leading to poor compliance monitoring on pension switching advice during a period of rapid expansion.

In the findings of its investigations, published today, the FSA says it found some advisers were offering ‘portfolio advice services' where the additional costs were not justified, and some tied advisers were not investigating a customer's existing pension arrangements.

The regulator says there has been "great improvement" in the market, but adds further industry action is needed to stamp out the remaining number of firms still giving high levels of unsuitable advice.

Dan Waters, the FSA's director of conduct risk, says: "More than 10% of all pension switching advice since April 2006 (A-Day) will be looked at again as part of the past business reviews firms are carrying out."

Following an initial thematic review in 2008, the FSA again assessed 22 firms it found posed the highest risk of offering poor advice.

In total, six firms have been referred to the FSA's enforcement division as a result of work on pension switching, including Tenon and Financial Ltd.

Waters adds: "Although many firms have changed the way they operate, we remain concerned that some continue to give poor advice.

"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."

Since the original thematic review in 2008 the FSA has writen to over 4,500 firms setting out the standards the FSA expects of businesses.

The report, Quality of advice on pension switching: an update, is available on the FSA website.