The director and chartered financial planner for Coventry-based Adrian Smith & Partners said any investors with contracts predating 1995 may be incurring higher charges than necessary, and called on them to conduct regular reviews.
He said it was possible that those who were being “unfairly hit” had the option to transfer their pensions, but they must consider taking advice.
Mr Hutchings said: “A lot of the higher charges are within the older contracts and we would recommend anyone with an old-style retirement annuity or pre-1995 contract to seek a professional review.
“In September 2002, the government highlighted the issue with a report, which was called To Switch or Not to Switch?, providing an analysis of the gains achieved through switching. But despite this, many people have failed to look at the charging structure of their contracts and this is why, unfortunately, they continue to be stung.”
|FCA rules on switching|
In June, the FCA issued guidance on pension switching, looking at what was not an acceptable consequence from switching. It found that unacceptable outcomes were when:
• The switch involved extra product costs without good reason.
• The fund(s) recommended were not suitable for the customer’s attitude to risk.
• The adviser failed to explain the need for, or put in place, ongoing reviews when they were necessary.
• The switch involved loss of benefits from the ceding scheme without good reason.
Danny Cox, head of advice for Bristol-based Hargreaves Lansdown, said he agreed with Mr Hutchings, but there could also be disadvantages to transferring. He said: “Moving pension schemes could result in people getting hit with a market-value reduction and so there could be an additional charge by transferring.”