Pension liberators could exploit adviser charging loophole

The head of platform marketing for pension and investment provider AJ Bell said current FCA rules did not impose a maximum customer-agreed remuneration level.

This could subsequently lead to some advisers charging higher than average fees for a pension transfer, before paying a rebate back to their client after taking a cut.

Mr Morrison said the practice could be seen as allowing pension liberation through “the back door”. He added: “As an industry, we need to ask should there be such a thing as decency levels for adviser charging?

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“At what level does an adviser charge become an unauthorised payment? If a high fee is charged to a client for a transfer out of the pension pot, an unscrupulous adviser could then rebate a portion back to the client, which is essentially pension liberation.

“Some providers impose these decency levels while others do not, but it is clear that they all need some degree of monitoring.”

Prudential has imposed a decency limit on charging while platform provider Skandia has also set maximum charging levels, with initial charges at 7 per cent of the cost of the investment.

Aegon will permit initial charges of up to 10 per cent, followed by ongoing charges of 5 per cent before querying a transaction.

Andrew Smith, chief operating officer for Axa Wealth Elevate, said: “In line with regulatory requirements it is not for us to influence what is the acceptable level for these fees as it can vary significantly depending on the client’s circumstances and the service being provided.

“However in line with our regulatory obligations, we do monitor use of adviser charging and investigate any potential anomalies.”

Mr Morrison said: “It’s good that there are some controls but we must all be aware of the risks of pension liberation and the potential leakage from pension schemes.”

A spokesman for the FCA said it currently did not have plans to investigate the links with adviser charging and pension liberation, It also had no plans to impose a decency limit but was aware that some providers had done so.

Adviser View

Graeme Mitchell, managing director of Scottish Borders-based Lowland Financial, said: “This could be a potential problem regarding pension liberation, but if the regulator imposed a limit the problem wouldn’t exist. I would accept an industry-wide limit as long as it was flexible. I recently had to explain a fee charged to a client, but currently these limits vary by company. If we had a benchmark, everyone would know where they stood and it should close any loopholes.”