Public 'confused' over pensions

The majority of consumers still want help when taking out a pension but many are confused about what constitutes advice, the City watchdog said today.

The Financial Services Authority said that while consumers could use "decision trees" - which help people assess whether a stakeholder pension is suitable for them - 60% said they felt they needed more help before buying one.

It also found that a similar proportion of people taking out a stakeholder who had not received regulated advice thought they had, suggesting consumers may be confusing the provision of information and general assistance with advice.

The FSA found that overall firms selling stakeholders preferred to use their established sales methods, rather than getting people to use decision trees without advice.

But around seven out of 10 consumers also said they would feel comfortable using decision trees to buy products similar to a stakeholder.

Stakeholder pensions, which have charges capped at 1%, are designed to be sold without the need for advice, and are accompanied by decision trees to help consumers assess whether they are suitable for them.

Four out of five people taking out a stakeholder pension said they were aware that the product met certain minimum standards, but 40% wrongly thought this meant there were no risks associated with the product and 10% thought it meant they were backed by the Government and that their money was protected.

The research was conducted for the FSA to find out how effective the regulatory regime for the sale of stakeholders was, including the introduction of decision trees.

It will also help the regulator develop a regime for the sale of the proposed new suite of stakeholder-style products, which include an investment product and with-profits fund.

Norman Digance, group manager of conduct of business standards at the FSA, said: "The good news is that decision trees are liked and understood and can play a useful role in the buying process, provided it is alongside some form of other help.

"However, a significant number of consumers appear to misunderstand the basis on which a stakeholder pension was sold to them and felt that they received advice when they had not.

"We will address these and all the other findings in the research when considering what changes it would be appropriate to make in the regulation of stakeholder pensions."

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