Personal Finance Society call for future public and industry protection
14 April 2015
Demand for facilitation of DB transfers has been evident since the pension reforms took effect on 6 April and, according to Personal Finance Society chief executive, Keith Richards, is likely to grow steadily as people become aware of the option to access their cash.
However, he cautioned that both consumers and advisers need greater protection to avoid short-term gain resulting in long-term pain for many who later regret the decision to cash-in and look for someone to blame.
“We need to take heed of similar situations in America and Australia, where such flexibility has resulted in retirees running out of both capital and income early into their retirement,” he warned.
“Our government and regulators are sensibly seeking to mitigate the risk of poor outcomes by ensuring that people take impartial professional advice. But problems will emerge where the client is not really interested in the advice and just wants the adviser to facilitate a transfer.”
Whilst being fully supportive of the reforms, Richards says it is vital to protect against the unintended consequences as far as possible.
“For the concept of pensions freedom to operate successfully in the way envisaged by the Treasury, it must be accepted that refusing to facilitate an unsuitable insistent client transfer or annuity re-sale will in most instances be an appropriate decision for an adviser to take from a professional standards perspective,” he outlined.
“This could of course leave consumers frustrated and critical of the reforms. So if the Government expect advisers to facilitate transfers, irrespective of their advice to the contrary, there must be a change of process to further protect the client and guarantee that advisers will not be held liable if a poor outcome subsequently materialises.
“Insistent transactions against professional advice should clearly contain appropriate risk warnings from the adviser and we have proposed an additional independent warning from the scheme trustee, highlighting exclusion from any form of future redress against the adviser, trustees or the FSCS,” he explained.
“If clients are still confused in any way regarding the advice they have been given, this extra independent warning by the trustee should make them think again before proceeding - further protecting their best interests,” he concluded.
“I agree with the principle that it should be the public’s right to make an informed decision, but they must also accept responsibility for doing so.
“Until then, our advice to members is clear and unambiguous: do not facilitate activities which go against your professional advice and the best interests of the client.”
The PFS has registered its concerns and recommendations with the Government and FCA and is currently in discussions with both.
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