Consumer Panel welcomes FSA delay on RU64 Rule

26 May

The Consumer Panel today welcomed the decision by the Board of the FSA to delay a decision on whether to remove the RU64 Rule in the light of today's publication of the Government's White Paper on Pension Reform.

The Chairman of the Financial Services Consumer Panel, John Howard said:

"We continue to believe that it would be a mistake to remove the RU64 Rule, which requires financial advisers to tell clients about the existence of low cost stakeholder pensions when advising on pensions generally. The main points we have made to the FSA Board are:

• removal of RU64 could mean a new round of mis-selling, causing consumers not only to buy a pension that is more expensive than they need, but also possibly disqualifying them from being eligible for the National Pension Savings Scheme when that comes into being.
  

• The FSA has said that it could use the principle of treating customers fairly and the suitability rule instead. But the suitability rule only requires advisers to recommend the most suitable product from their range, and this will not be sufficient to protect consumers. Multi-tied advisers who have a stakeholder pension in their range at present will simply have to drop that product from their range to comply with the suitability requirements. This could also affect the balance of the market, as independent financial advisers would not be able to take this action.

"At least the FSA has now given more time to consider how the development of NPSS may affect the selling of pensions in the next few years and the impact of the removal of this rule in the light of that."

Notes to editors

1. The details of the FSA's original proposals to remove this rule are in its consultation paper CP 05/08**.
   

2. The FSA established the independent Financial Services Consumer Panel in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA’s performance in meeting its objectives. The Consumer Panel has statutory status.

3. The emphasis of the Panel’s work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA’s remit. More information about the Panel's work is available on this website.

4. The Consumer Panel brings together a wide range of relevant experience. This includes financial services regulation, working with vulnerable consumers, consumer protection, consumer education, front-line money advice, legal expertise, competition policy, public policy analysis, market research and media.

5. There are currently eleven members of the Panel as listed below (for further information on individual members, see the Panel's website).

   John Howard (Chairman)
   Adam Phillips (Vice Chairman)
   Caroline Gardner
   Harriet Hall
   Tony Hetherington
   Stephen Locke

   Nick Lord
   David Metz
   Paul Salvidge
   Robert Skinner
   Carol Stewart