PensionsApr 1 2015

‘Just say no’ to pension freedoms – advisers

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‘Just say no’ to pension freedoms – advisers

Many advisers look set to say “no” to their clients following this month’s reforms in a move that could disappoint many savers hoping to encash their pension or transfer a DB pension to a DC one.

Matt Timmins, joint managing director of SimplyBiz, said: “If your client wants you to perform an action against the advice you have given and ultimately not in the client’s best interest, then we strongly recommend that you don’t proceed.

“We are concerned about mixed messages from the Fos and the FCA, the potential for future claims and the exemptions that may be enforced in the future by professional indemnity insurers.”

It follows meetings between adviser groups and Fos, during which the ombudsman suggested that if a client insisted on doing something they had previously been advised against, an IFA would not necessarily be protected from action.

Mike O’Brien, managing director of TenetConnect and TenetSelect, said the firm had contacted its advisers warning them of the dangers.

He said: “There will be circumstances when an adviser should simply walk away from a customer where the transaction is clearly unsuitable and would lead to significant customer detriment.”

Some advisers have said no to total encashment. Steve Farrell, an adviser with Hampshire-based Lawrence Clarke, said: “We will not give advice to people who want to encash their pensions.

“We were IFAs back in the days when some advisers were encouraging people to take out their personal pension. We decided a long time ago not to do that, and behold, there was a big pensions mis-selling crisis.”

Chris Bowmer, director of Northamptonshire-based Fortitude Financial Planning, said: “We start with the premise that there has to be a proper objective.

“For someone who comes to us with a pension enquiry, we will not help them unless we do a full financial plan.”

Others will end up saying no to DB/DC transfers. From this month, those seeking to transfer a DB pot to a DC pot will have to seek advice before doing so if their pot exceeds £30,000 in value.

However, David Trenner of Glasgow-based Intelligent Pensions said: “I will not sign off transfers for people who say they want transfers. If people want to do what we have told them not to, we will talk to them; but if we really don’t think they should transfer, we won’t facilitate it.”

Commenting on an open forum from LifeTalk, Martin Dodd warned of using income drawdown as a fallback option.

He said: “I am relatively confident that drawdown as a concept will prove to be mathematically the wrong choice for those who live beyond normal life expectancy.”

Meanwhile the Personal Finance Society has written to all of its 35,000 members making them aware of the dangers of facilitating things that they have previously advised against.

Chief executive Keith Richards said he has also written to the government and the FCA and called for greater protection for advisers on this issue.

He said: “Advisers should not get involved in facilitating any activities that go against their advice.

“If you facilitate an activity you will carry the same level of liability as if you had fully recommended it.”

A spokesman for the FCA said: “Where an individual insists on going ahead with something, the adviser should set out their advice clearly, in writing and keep a clear record that the customer has insisted on proceeding with the transaction.”

A spokesman for Fos said: “While it is true that obtaining an ‘insistent client’ declaration and documenting warnings will not necessarily mean the ombudsman will not consider a claim, it does not mean we are going to uphold the case.”

Timeline

19 March 2014: Chancellor George Osborne announces pension freedoms in the Budget.

3 December 2014: In the Autumn Statement Mr Osborne removes so-called death tax from annuities, allowing beneficiaries to receive payments tax-free.

17 December 2014: The Taxation of Pensions Bill receives Royal Assent, enshrining the reforms in law.

12 January 2015: Pension Wise is unveiled as the government’s guidance service.

26 January 2015: FCA writes to the chief executives of pension providers setting out its plans for a second line of defence.

18 March 2015: Mr Osborne announces plans for a secondary annuity market in the Budget.

25 March 2015: Pension Wise starts taking bookings for guidance sessions.