Pension trustees will be responsible for addressing advisers’ fears clients could forge letters or otherwise attempt to fake advice to force through transfers, with the Department for Work and Pensions telling FTAdviser they have a duty to ensure genuine advice has been given.
Under new regulations that were proposed earlier this year, anyone with a DB pension pot of more than £30,000 must seek regulated financial advice, though they are not obliged to follow the recommendation given.
As previously revealed by FTAdviser, the onus is not on providers to find out what the advice was, they merely must ensure that advice has been taken.
Last week, FTAdviser revealed that a number of advisers have been asked to sign letters to state that clients have received advice, despite it not being given. FTAdviser commentators then raised concerns that clients could lie to providers by stating they have taken advice, including producing fake letters.
The Financial Conduct Authority confirmed to FTAdviser that consumers must hand over a ‘advice confirmation’ letter, which needs to be given to the provider and must contain four pieces of information.
The letter has to state:
• that advice has been provided which is specific to the type of transaction proposed by the member or survivor;
• that the adviser has permission under Part 4A of FSMA to carry on the regulated activity in Article 53E of the RAO [Regulatory Activities Order];
• the firm reference number of the company or business in which the adviser works for the purposes of authorisation from the FCA to carry out regulated activity in Article 53E of the RAO; and
• the member’s or survivor’s name, and the name of the scheme in which the member or survivor has subsisting rights in respect of safeguarded benefits.
While all of the above could be forged by a client, a spokesperson for the Department for Work and Pensions has reassured advisers, stating that due diligence falls on trustees’ shoulders.
A DWP spokesman said: “Trustees have a legal duty to act in the best interests of the scheme and their members.
“As part of this they will need to ensure that they do their due diligence when confirming that a member has taken advice, and that certificates provided by the member are genuine.”
The Pensions Regulator’s guidance for DB to DC transfers also stipulates that it falls on trustees to insure the advice has the correct permissions to carry out these transfers.
Chris Smeaton, director of marketing at James Hay, said that it has seen an increase in the number of transfer requests, however not in actual cases that have proceeded.
“To ensure the advice letter is genuine we check on the FCA’s register that the adviser is FCA authorised and that the firm has the FCA permission to provide advice on pension transfers.
“The obligation to ensure advice has been given before the transfer is allowed is with the transferring scheme’s trustees (not the receiving scheme), however we do our checks on any of the DB to DC transfer requests as a matter of best practice.”
A spokesperson for Prudential added: “We require the application for a transfer to include a signature from an authorised adviser, whose credentials we verify, before proceeding.”
Previously, Lee Tomkins, IFA at Blackdown Financial Independent Financial Advisers, told FTAdviser that he and others at his firm had received enquiries from “vested clients”, who just want a letter stating they have had ‘advice’ as providers will otherwise not let them transfer.
Another adviser, Ed Fairey, managing director of IFA Fairey Associates, also said he had been approached by prospective ‘clients’ wishing to pay a nominal fee to get a letter saying they had taken advice.
None of the advisers spoken to by FTAdviser or who have since come forward have agreed to produce the letters, but it was generally supposed the ‘clients’ were seeking to avoid paying potentially more than £1,000 to get formal advice which would likely advise against a switch.
DB scheme administrator Mercer said that in order to circumvent this obstacle, “increasing numbers of employers are willing to pay for at least some advice”.
donia.o’loughlin@ft.com
