Opinion  

Advice demand becomes a potent pensions defence

Ashley Wassall

It was inevitable really - and some of the comments are clearly cause for serious concern.

Members of defined benefit pension schemes with more than £30,000 invested, who must seek advice before a provider can process a transfer request, are trying to ‘game’ the system. Bung a friendly adviser a modest backhander and get a quick letter saying you’ve done the necessary.

Savers are not obliged to follow any advice given and, as we reported last week, providers don’t even need to ask. So why, you may ask, is this even a problem? Just take the advice and then proceed anyway, ignoring the perhaps inevitable recommendation to take a different course.

It all comes down to brass tacks. They don’t want to part with the £750-£1,200 it would cost to get full advice when most know full well they’d be challenged over their plans.

This should please the regulator greatly. Among the many comments below the story were tales of ‘clients’ that had gone to several advisers and been refused a letter, while the insurer continued to hold out on transferring the fund.

If a client is aware of the pitfalls - which are legion and likely to make it a bad move for all but a very few - and wishes to go ahead anyway, then that is the nature of freedom. But it would be irresponsible to allow them to proceed without being fully aware of the consequences.

If it takes the sheer cost of doing so to put off the profligate few, then so be it.

It’s also broadly good for advice. More and more individuals are aware of the need to seek advice, even in the most utilitarian sense. Many will do so and find it an invaluable experience, possibly changing their plan and even remaining a client longer term. They’ll be valuable referrers, too.

Others will obviously also do so and ignore what is said - and that is their prerogative. They will at least have been exposed to advice and been fully informed.

Of more concern are those that decide not to go through the advice process and instead simply tell the provider they have. There was one example of that in the comments, too, along with plenty of paranoia over faked letters and the like.

There’s clearly a need for providers to be aware of these risks and perhaps some simple checking procedures. That’s for the FCA to decide (we’re checking with them now, since you ask).

These issues should be ‘edge’ cases: in the main I’m pleased that those unwilling to part with the cash for proper advice are being stopped in their tracks and even more pleased that more will eventually seek advice and hopefully benefit from it.