Saving for old age requires trust in financial services
The review of sales incentives in 22 companies, comprising banks, building societies, insurers and investment houses with their own in-house salesforces, showed 20 of the firms were paying incentives that increased the risk of mis-selling.
%VIRTUAL-SkimlinksPromo%This included a company that offered a 'first past the post' scheme where the first 21 staff to hit a target earned a £10,000 bonus and another offering a bonus of 100% of salary if staff hit loan sales targets and sold payment protection insurance (PPI) to half of borrowers.
These incentives breed unscrupulous sales tactic, with sales staff at one company colluded to overcharge a customer on a product so they could hit a sales target.
Although the report highlighted some terrible practises it was not exactly shocking – isn't this type of behaviour exactly what we have come to expect from our banks and insurers?
The frequent tales of mis-selling and banks dishing out compensation to customers has led consumers to believe that financial services is a minefield that needs to be avoided at all costs.
This is a crying shame because the cost is often paid by consumers later in life when they have failed to save for their old age.
The truth is that until the public can trust financial institutions with their money they will not be inclined to save for the long-term. They are even less likely to save into a pension when there are so many rip-off charges and mis-selling stories – why would you tie your money up for 40 years with a company you don't trust?
The need to for trust runs deeper than just pension providers, we also need to be able to trust that our government will not change the rules around pensions. The government wants people to save more but it needs to pledge that saving for old age will actually mean we are better off when we reach retirement and the prudent are not penalised.
Building trust in pensions is a tall order but hopefully the regulator's review is the first step on a rocky road to a recovery in confidence. If we can trust our financial institutions with our money, surely that's a winning formula for us all.