Last week, The Financial Conduct Authority (FCA) reissued it’s advice about final salarytransfers. The FCA was at pains to remind customers of the risks that can be involved when transferring a defined benefit to a new scheme.
FCA Alert on Cold Calling Pension Transfer Advice
In an alert at its website, the regulator put out a series of questions that consumers should consider before moving their pension pot out of a defined benefit pension scheme into a defined contribution pensions scheme. These included questions such as whether the decision is being prompted by an unsolicited call, email or text.
It also suggested that savers should also question the type of scheme their money is being transferred too. Whether it is going to be invested in unusual investments such as overseas property, forestry, storage units, care homes or biofuels.
The regulator also raised concerns over offers of so-called ‘free’ pension advice. The FCA stated: “Free pension reviews are designed to persuade you to move money saved in an existing pension pot to a new scheme.
“Chances are your money will be invested in something that is either very risky or a scam.
“Professional pension advice is not free. Professional advisers looking to act in your best interests are very unlikely to cold call you offering their services.”
Consumers were warned to always check if the firm providing advice is authorised, and has permission to give advice on pensions. Many firms that don’t have chartered status, like Haven, are not in a position to offer the level of advice to clients that they need for such important decisions.
There have been a number of high profile FCA suspensions recently. Where firms gave advice on DB pension transfers, with claims of clients being lured by cheap deals by introducer firms, which, because they are unable to give advice, then referred these clients to partners.
Several sources have said that certain of these types of advisors have been present at roadshows, which are attended by scheme members wanting more clarifications about their pensions. They have then proposed a flat fee of £1,500 to arrange their DB transfers.
At Haven, we join with the FCA on condemning such poor basis for advice. We would always remind our clients that many cold calling advisors are badly run, and according to the FCA others “may be outright scams”.
The Right Advice is Essential
The FCA stated in its alert: “You could lose some or all of your pension pot. Even if theis reasonably well run, unusual investments tend to be unregulated and high risk. Returns are not guaranteed, it is generally difficult to have access to your money, and all your money is at risk.”
It is also notable that as some of these companies making offers are not authorised or regulated by the FCA. In this case, according to the FCA, consumers “may have no right to complain to the Financial Ombudsman Service or to claim compensation from the Financial Services Compensation Scheme if things go wrong”.
The FCA also added that following: “for most individual investors, investing their pension savings in unregulated investments is unlikely to be in their best interests … You could lose everything you have invested, significantly reducing yourincome … All alternatives should be considered and leaving your pension pot where it is may be the best decision.”
Haven Chartered Financial Advisors
The abundance of poor advice is worrying to all in the industry. As Chartered Financial Advisors,take our responsibilities very seriously, to make sure our advice is impartial, and solely focussed on the needs of our clients.
If you feel you have been given poor advice from another advisor, or would like to talk to one of our Chartered advisors, contact us today.