Age Partnership warns of pension permissions blockage

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Age Partnership warns of pension permissions blockage

Age Partnership said its adviser service reveals a growing trend in the number of approaches from clients on the back of failed transactions via IFAs who did not have the appropriate permissions in place.

At the same time, the number of direct referrals from advisers who are aware of their limited capacity or lack-of permissions is also increasing.

Age Partnership added the March 2015 consultation on defined benefit to defined contribution transfers and conversions or transfers of safeguarded benefits to flexible benefits which followed on from the pension reforms announced in the Budget last year, proposed new protective measures for members choosing to transfer their benefits.

The changes were confirmed in finalised guidance issued in June 2015.

From 6 April 2015, scheme members with safeguarded pension benefits of £30,000 or more in their scheme, wishing to transfer these benefits to access their benefits flexibly, must first get advice from an authorised adviser.

Age Partnership said in order to advise on all defined benefit pension schemes and some defined contribution pension schemes advisers must be appropriately qualified and experienced, as well as holding the necessary pension transfer permissions with the Financial Conduct Authority.

However, the firm sees many cases where advisers remain unaware they need these permissions.

In turn this may be putting some customers at risk of unexpected delays after the provider rejects their transfer.

If a client is given advice by an adviser without the correct permissions, the ceding scheme should stop the transaction, causing serious delays for the client, as well as lost business for the adviser.

Age Partnership added that this was a growing problem with more customers with defined benefit pensions currently seeking the same type of freedoms offered to their defined contribution counterparts.

The firm said that added to this was the issue that the growing prevalence of IFAs being approached by clients with cases that don’t meet their minimum case threshold.

Age Partnership said it is seeing an increase in referrals from advisers relating to all different pot sizes and types of pension scheme (not just defined benefit or defined contribution) looking to outsource because it is not high enough value for them – or simply because they are too busy to meet the demand.

Howard Hill, pension income expert at Age Partnership, said: “The pensions industry has seen a step change over the last 12 months with the introduction of the pension freedoms, but there are still a few crinkles to be ironed out in terms of the implementation.

“Advisers have been adjusting to the changes quickly and professionally, but there is still a knowledge gap about the subtleties of advising on DB to DC transfers and conversions.

“Some advisers simply don’t realise that they need FCA pension transfer permissions – which they may not have – to take on all clients.

“Not only this, some advisers are being forced to turn down clients with smaller pots who don’t meet their minimum case threshold. For independent advisers in particular, it simply doesn’t make business sense to take on all cases, especially in the current environment of plentiful demand.”

Daren O’Brien, director at London-based financial advisers Aurora Financial Solutions, said: “Age Partnership are correct and that many issues are all contributing to this problem, creating almost a perfect storm.

“There is the FCA being particularly slow in certifying pension transfer specialists who have applied for these permissions, the compliance uncertainty for advisers who have the permission from separating the advice from transacting any transfers and finally clients who want to go against that advice and take all their cash out irrespective of any sound advice not to transfer provided.

“The speedy introduction of pension freedoms in April has been badly promoted and the implications poorly explained leaving clients, advisers and providers with difficulties adding further to the delays.”

Patrick Connolly, head of communications at Chase de Vere, said: “The pension freedoms have given consumers far greater choice in how they take their pension benefits and this has opened up significant financial planning opportunities for advisers.

“I agree that it isn’t economical for advisers to give advice on some lower value pension arrangements.

“However, I would be very surprised if advisers didn’t know what permissions they had and in which areas they were permitted to give advice. If this is the case it would suggest that something is very wrong with their regulatory procedures.

“There is a difficult balance between allowing people to use the new pension freedoms and also having protection in place to ensure they don’t make huge errors which could affect their, and their family’s, standard of living in the future.

“While the current systems aren’t perfect, I would prefer an environment where there are delays but the right decision is reached in the end, to one where the process is far speedier but more people make the wrong choices

“What is clear is that many people making these important decisions need to take independent financial advice.”

ruth.gillbe@ft.com