You are here: Home - Retirement - Retirement planning - News -

Consumers may not be receiving suitable pension transfer advice

0
Written by: Paloma Kubiak
03/10/2017
The city watchdog is concerned consumers may be at risk of harm as its study of Defined Benefit pension transfers shows that in half of cases, the advice received may have been unsuitable and unclear.

It is estimated 80,000 Defined Benefit (DB) pensions have been transferred into personal pensions over the past year and given the growth, the Financial Conduct Authority (FCA) has looked at how advisory firms have adapted to meet consumers’ needs.

Advice is required for all transfers where the transfer value exceeds £30,000, but the FCA found that a large number of firms don’t advise on DB transfers. Instead, in many cases, they introduce clients to specialist firms.

The regulator reviewed 88 DB transfers where customers were recommended to transfer out and it found that less than half were suitable (47%), 17% were unsuitable and in 36% of cases it wasn’t clear if the recommendation was suitable.

It also looked at the suitability of the recommended product and fund, and found that 35% were suitable, 24% were unsuitable and 40% were unclear.

The FCA said firms must make sure that their personal recommendations are suitable for their clients. However, many firms had designed processes and procedures where it was difficult to assess suitability.

This included firms:

  • Failing to obtain enough information about clients’ needs and personal circumstances
  • Failing to consider the needs of the client alongside their objectives when making a recommendation
  • Not making an adequate assessment of the risk a client is willing and able to take in relation to their pension benefits.

In some cases, advisers had failed to make appropriate comparisons between the defined benefit scheme and the intended receiving scheme. Therefore advice was based on incorrect or inaccurate comparisons.

‘Major choice so it’s vital consumers are supported’

Nathan Long, senior pension analyst at Hargreaves Lansdown, said: “The starting point for anyone with a DB pension should be to assume it is best left as it is. Transferring means giving up a promised income in return for the uncertainties of investing in the stock market. Transferring away could be investigated further if you are in poor health, are single or have concerns about the employer that provides your pension.”

Steve Webb, director of policy at Royal London, said: “The decision to give up rights in a final salary pension scheme is a major choice for individuals, and it is vital that they are supported by high quality, impartial financial advice.

“But the FCA has highlighted clear areas of concern, including the interaction between advisers and transfer specialists and the suitability of the product where the transferred money will be invested.  It is vital that these warnings are heeded so that all adviser firms are adhering to the standards of the best.”

See YourMoney.com’s 10 things to consider before opting out of a Defined Benefit pension scheme for more information.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
companycar
Could you save £300 a year switching to PAYG car insurance?

Drivers who use their cars once a week could be wasting nearly £300 a year on insurance so switching to...

Close