Conservative peers have warned the Government it is “complacent” about the impact the RDR will have and is facing a “shambles” and a “crisis” in the savings market when it comes into force on 1 January.
Speaking in the House of Lords today at the Financial Services bill report stage, Lord Howard Flight and Lord Naseby gave stark warnings about the impact of the reforms.
Flight said: “There will be a significant shambles in the savings industry next year. The insurance and life companies tell me their systems are nowhere near ready and they are not clearly organised as to how to conduct their business post-RDR. There is a very powerful argument for a pause if not some adaption.
“The FSA, FCA and Treasury are quite complacent about what is going to be a serious situation for those who are not professionals, used to paying fees or with modest savings. They will be left with very few conduits. It is a particularly undesirable outcome.”
Last year, the Treasury select committee recommended a one year delay to the RDR after its inquiry into the reforms. but this was quickly dismissed by the FSA.
Lord Naseby says he does not believe enough people will pay up-front adviser fees.
He said: “Savers do not have enough resources to fork out around £500 or considerably more on fees.
“It is all very well ploughing on because it is happening in January but there jolly well better be a Plan B. I fear very much that after three or four months there will be a major crisis unless there is a plan ready.”
But Treasury commercial secretary Lord James Sassoon said the RDR will go ahead on January to tackle “devastating effects of poor financial advice”.
He said: “The financial detriment caused to consumers as a consequence of poor, biased financial advice cannot be overstated. It has led consumer groups such as Which? to support the RDR. There is a need for greater professionalisation and the bar has not been set excessively high.”
Sassoon highlighted pensions misselling, Arch Cru and FSA figures showing £223m per year is lost to poor financial advice.