Hundreds of thousands of people have already transferred their final salaryout of Defined Benefit Schemes into more flexible Defined Contribution Schemes. However, following criticisms last year of the British Steel scheme, when hundreds of current and former employees decided to transfer out of the scheme, the Financial Conduct Authority (FCA) has decided to investigate the practice further.
Advisors Face FCA Scrutiny
The main concerns are that British Steel pension scheme members were misadvised about transferring out of their pensions, and that many had been pressured into transferring pensions inappropriately, after being convinced by financial advisers.
The chair of the work and pensions committee, Frank Field MP has warned the FCA that they are “sleepwalking to another huge mis-selling scandal”.
“From their intervention in this affair it seems clear that the FCA’s actions still effectively protect these businesses’ ability to make money out of pension funds, rather than protecting pension savers,” he said.
In response, the FCA is contacting every pension transfer adviser in the country to request details on their transfer business.
FCA Not Planning onTransfer Ban
Despite the FCA upping its scrutiny of pension transfers, it appears that it does not plan to ban or suspend pension transfers.
In a letter to the work and pensions committee, executive director of the FCA executive, Megan Butler, said:
“It is important to note that there are many transfers each year that are suitable based on the individual circumstances and needs of the consumer. Therefore introducing a blanket ban or suspension would impact those cases where a transfer is warranted and in the interest of the consumer. For these reasons we do not believe a blanket ban or suspension is warranted, nor have we proposed this as a suggestion to the Government.”
The Need For Client Focussed Pensions Advice
The fact that the FCA is not planning to ban or suspend pension transfers is welcome news. However, the rise in unscrupulous firms pushing clients to transfer, even when it is not int their best interest is worrisome.
Some advisors have moved away from the pension transfer market as a result of the scrutiny. Unfortunately this has left savers exposed to some those more unscrupulous firms.
Whilst we applaud the work of the regulator in stepping up the work on catching out those who have given poor or misleading advice on pension transfers, it is important for pension scheme members to have the ability and freedom to make their own decisions. To do this they need clear customer focussed advice. The FCA has stated in it’s review that many firms that are mis selling advice have “poor business models”, in terms of industrialising their defined benefit transfer business and not focusing on individual client needs.
Haven View Of Pensions Transfers
In our view, client needs are the most important issue when dealing with any financial issue. Pensions transfers can represent an amazing opportunity for many pension scheme members, but they are not the right solution for everyone and no one should be forced into a quick decision on such an important matter.
Holistic advice takes into account the full needs of a client and makes sure that they are always in charge of their own future.
For more information on whether a pensions transfer is the right option for you, contact us today.