Money News

Older Brits at risk from powerful finance firms

Older Brits suffering financially are at risk from investment misselling.

Financial firms hold the power over customers that could lead to mis-selling and people buying investments and accounts that are unsuitable.

A key power financial firms hold over consumers is information and people heading to retirement are particularly at due to the high levels of assets they have picked up, according to the Financial Services Authority’s (FSA) Financial Risk Outlook.

Older people are more vulnerable to the mis-sale of drawdown products, which can earn more money for firms than annuities, as well as investments that are higher risk than suitable.

Those heading to retirement are suffering from a number of financial stresses, the FSA highlights.

Annuity rates have fallen more than 10% over the last year and the collapse of share prices has hit the size of pension pots.

People looking to their homes to fund retirement have also suffered from property price crashes.

The regulator warned the problem was “acute because of the complexity of products and services and the fact that in many markets consumers make few purchases, so there is little learning from experience.”

Financial firms have further power over consumers because of their limited financial knowledge and the fact it may be only much later that consumers realise they have been disadvantaged.

The report had a strong message for consumers: “They should check that they understand the risks to their investments as well as the potential benefits, particularly if they feel that their desire to take risks with their money has changed.

“Consumers approaching retirement should be aware that if their pension pot is under £100,000, income drawdown is unlikely to be the most appropriate option. Consumers who do purchase income drawdown products need to ensure that their financial position is reviewed regularly.”