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Providers split on DB advice relevance

Providers split on DB advice relevance

Providers have warned that they are between a rock and a hard place regarding defined benefit transfer requests, as while they need to ensure the saver has taken regulated financial advice, they are under no obligation to find out what the advice was.

From earlier this month, anyone who wishes to transfer out of a DB scheme and into a defined contribution scheme must obtain regulated financial advice, unless the pot is worth less than £30,000.

FTAdviser asked providers if they would carry out the transfer despite the consumer being advised against it, with a number of them stating that while they need to ensure regulated advice has been received, they are not under any obligation to check what the advice was.

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A spokesperson for Aegon told FTAdviser that while there are new requirements around when an individual must take advice before transferring, and the Pensions Schemes Act introduced requirements for the scheme managers and trustees to make certain additional checks, there is no regulatory requirement on any party to check that the individual is acting in line with that advice.

“As an industry, we need to strike a balance between protecting customers from taking actions they might later regret and stopping them accessing the new freedoms the government has introduced,” the spokesperson stated.

“In the new world, customers need to be sure they understand the implications of their decisions. If they choose to act against advice it’s important they understand they are taking this decision on their own; we’ll be keeping this situation under review and expect the FCA will do likewise.”

Aviva, Friends Life, Phoenix Life and AJ Bell will all accept the transfers, with a spokesperson for Aviva and Friends Life emphasising that “what that advice entails is strictly between the customer and their adviser”.

A spokesperson for the regulator told FTAdviser: “The legislation only requires providers to check that advice has been taken.”

Chris Wiscarson, chief executive of Equitable Life, emphasised that it acts on the instructions of the scheme trustees and does not deal directly with individual members, therefore the trustees have to ensure that financial advice has been received.

“What is important is that we would not typically know the nature of the advice (nor may the trustees), that being confidential between adviser and customer.

“Our dilemma would be if we were told that IFA had advised against transfer, but the trustees nevertheless instructed us to proceed. Contractually we would have to act on the trustees instructions, but we would push back initially to check that both trustees and customer alike were aware of the risks.”

When questioned further, Mr Wiscarson added that he would be “surprised” if the trustees had pushed aside advice against a transfer.

“But if they did set it aside and trustees insisted on exercising their contractual rights to transfer, I think we would have to accede. We would definitely take legal advice were that circumstance to arise as we would not lightly allow policyholders do something that was demonstrably inadvisable.”