HM Treasury is keen to tackle the problem of insistent clients before the secondary annuity market is given the go-ahead, according to the chief executive of the Personal Finance Society.
Keith Richards spoke to FTAdviser after meetings with HM Treasury last week to discuss proposals to allow annuitants to sell their right to future income streams for an upfront cash sum if it suits them.
In the first Conservative Budget last July plans to launch a secondary annuity market were pushed back to April 2017.
The launch of a secondary annuity market raises the prospect of advisers facing similar insistant client issues to the ones brought about by the rules on defined benefit transfers.
If advisers boycotted insistent clients for annuities in the same numbers they have been avoiding them for defined benefit transfers, this could frustrate consumers and prevent the secondary annuity market from emerging.
Mr Richards said: “The Treasury is alert to the potential risks and the unintended consequences that could stem from greater freedom and choice over the selling of what is effectively a guaranteed income.
“The Treasury has been looking at a number of options and we have been helping with those discussions. We are talking to the government about solutions to avoid what we have already seen.
The Treasury has been looking at a number of options and we have been helping with those discussions. Keith Richards“The positive thing is that they recognise the importance of this issue. We need to give advisers certainty that when they are helping the public they are not going to end up feeling the consequences.”
A consensus appears to have emerged among advisers on the issue of clients insisting on DB transfers.
A survey conducted by the PFS showed 81 per cent of members saying they would not facilitate an insistent transfer if they believed it was not in the best interest of the client.
Only 2 per cent were willing to comply on all occasions in support of the new pension freedoms.
Earlier this month Mr Richards said advisers should be prepared to walk away from the secondary annuity market if they find themselves having to act against their clients’ best interests.
One of Mr Richard’s proposed solutions was that scheme trustees and providers would have to ask the client for the outcome of their advice before allowing them to go ahead.
Last year the Financial Conduct Authority published Factsheet 35, which aimed to provide a reminder of the FCA’s position on insistent clients.
It has recommended advisers provide advice which is suitable for the individual client and which is clear to the client, that it should be clear to the client that their actions are against the adviser’s advice, and that advisers are clear with the client what the risks of the action are.
But it has since acknowledged insistent clients is still a concern for advisers.
A spokesman for HM Treasury said: “The government has recognised a need for greater clarity on the issue of insistent clients.
“The recently closed Pensions Transfers and Early Exit Charges consultation sought evidence on this issue and this will feed into further work.”
