Savings rates have sunk to an all-time low: The savings gap and rising indebtedness are a burning platform that must be addressed to alleviate later life poverty. Financial firms, regulators, trade bodies and Governments, are perceived to have been insufficiently attentive to the needs and protection of consumers.
Regulators behind the curve: Although the public think that financial institutions' main role should be safeguarding people's money, there is a sense of disillusion and scepticism about the motives of financial firms. Rogue traders, lax regulation and unregulated products have caused major scandals and losses, feeding the perception that Regulators are always behind the curve, sweeping up after the fact, rather than pre-empting and preventing problems in the first place.
The pensions industry now needs to work harder to improve engagement and value for money: Having spent many years trying to improve the way the pension system works for people, there have been significant steps forward such as the creation of the Pension Protection Fund; and pensions auto-enrolment, however there is much more to do. The vast majority of workers are in defined contribution schemes, where the level of contributions, investment returns and charges will determine their future pensions. More transparency, fairer charges and improved products can encourage higher contributions.
Scandals still persist as more needs to be done to treat people fairly: The pensions industry has ongoing problems. I have called for simpler, more transparent charges for many years and have highlighted the Net Pay/Relief At Source scandal that forces the lowest earners to pay 25% extra for their pensions. Error rates in auto-enrolment and other pension data must be identified and corrected, so that a reliable Pensions Dashboard can be delivered. These problems are good examples of what can go wrong when the pensions industry fails to consider customer interests carefully.
New risks are emerging all the time: The era of 'light-touch' regulation (which was more like 'no-touch' regulation) resulted in the 2008 financial crisis. Since then, different risks have emerged. New technologies have enabled the rapid spread of unregulated, decentralised investments, which make greater demands on the regulatory system.
Consider banning unregulated investments in SIPPs: Cold-calling and unregulated 'introducers' have enticed unsuspecting individuals to invest their pensions in bogus schemes which have subsequently collapsed. If the sector wishes to regain the trust of consumers, it seems essential that new approaches are adopted. One proposal might be to ban the inclusion of unregulated investments in mainstream pension products such as Self-Invested Personal Pensions.
Collaborative co-operation: The TTF approach is about learning from past mistakes in order to improve future behaviours. The new global initiatives comprise a combination of regulatory bodies, Government Departments, Parliamentarians, campaign groups, Think Tanks, Governance and risk experts, academics and major financial firms who aim to achieve a collaborative, co-operative and collegiate approach to improve trust in the sector.
Treat customers fairly and improve transparency: These key stakeholders aim to work together to rebuild confidence in finance, in order to ensure more members of the public can benefit from the opportunities offered by sound savings stewardship and successful long-term investments. To achieve this, good value products and services, which treat customers fairly, are essential. The TTF will be working hard to encourage this.
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