The City of London Police says the amount of money being scammed from retirees trebled in May. This is a very alarming statistic, though perhaps only confirmation that the usual unsavoury operators have geared up to take advantage of the pension reforms.
It is unlikely that most people using an investment adviser will have ended up in the clutches of any scammers; not if they listened to their advisers anyway.
But the level of uncertainty surrounding aspects of the reforms should make advisers uneasy. They can take measures to protect their own businesses – for example, around insistent clients or by keeping strictly to minimum asset levels when it comes to helping people transact.
And yet, in leaving people to their own devices, the reforms have also probably elevated the risk of the public making serious blunders – beyond blowing some of the money on cruises or caravans.
We need to properly protect the public from making some rotten decisions...but ensure advisers do not pick up the tabIt is also fascinating to hear the FCA claiming that both the regulator and the ombudsman interpret the rules the same way. Advisers will take this statement with a tablespoonful of salt.
It also comes at a time when pre-pension freedom compensation scheme bills have risen by a staggering 300 per cent in some cases. It is surely not pessimistic but realistic to fear this could get much worse in the next few years.
Therefore, it strikes me as essential that politicians and regulators take a more holistic approach to the pension reforms and advice.
To have investment advisers hauled over the coals for trying to do right by their clients when dealing with reforms seems startlingly unfair.
Perhaps we really need a better approach to transfers, maybe including an FCA and government-approved warning in stark language telling clients and customers that if they find themselves living a long time, they may very well suffer financially by transferring from defined benefit schemes or GARs. This might also allow advisers to help potential clients transact so they do not end up in the arms of scammers.
Yet it is also clear the current compensation scheme set-up – where the principle of ‘polluter doesn’t pay, but everyone else does’ – could prove radioactive for the advice sector without change.
We need to properly protect the public from making some rotten decisions, but we also have to ensure advisers do not pick up the tab for all this confusion.
The system is not achieving maximum protection for consumers, while making a virtue of some regulations that only force people away from advisers. Surely this can’t be right. And, if in doubt, just ask the City of London Police what it thinks.
John Lappin writes on industry issues at www.themoneydebate.co.uk
