Emma Ann Hughes 

Ambulance chasers circling pension transfer scandal

Emma Ann Hughes

Emma Ann Hughes

Interest in pension transfers is at levels not seen since the 1980s.

More than £25bn was transferred out of pension schemes in 2016, the largest volume in a single year since Origo's Options Transfers service was launched in 2008.

Origo estimates the vast majority - around 90 per cent - of pension transfers in the contract market go through its service.

In total, Origo revealed it has facilitated the transfer of £100bn worth of pension transfers since 2008 showing just how busy a year 2016 was.

It is right that pension transfers are back in the spotlight post pension freedoms. 

For those who want to make the most of the pension freedoms granted by former chancellor George Osborne, it is right to consider ditching a defined benefit scheme.

On top of this, transfer values offered by defined benefit schemes have spiked recently.

But this week served as a reminder of the risks associated with pension transfers.

This week the Financial Conduct Authority told a financial advice firm to cease all regulated activity after it broke a voluntary agreement regarding pension transfers that it struck with the regulator.

Gloucestershire-based Bank House Investment Management was told by the FCA to cease any activity relating to pension switches or transfers into self-invested personal pensions yet it carried out 78 more transactions anyway.

Following a visit in July 2015 the FCA had "serious concerns" about the suitability of the firm's pension advice, which led to the regulator and Bank House reaching a voluntary agreement.

But in August 2016 the FCA became aware Bank House had broken the agreement.

The watchdog discovered it had advised 72 customers on 78 pension transfers, with a total value of £2.65m.

Reading the FCA’s notice, I hope this is not the start of things to come.

I remember all too clearly the pension mis-selling scandal of the 1980s when more than a million people were thought to have been incorrectly advised to take out personal plans when they would have been better off in a company scheme.

Compensation was paid to hundreds of thousands of people, the regulators of the day shook their heads and rules were introduced that were supposed to prevent a scandal of this magnitude from ever happening again.

Yet, here we are in 2017 and I must say this notice, along with recent remarks by the Financial Services Compensation Scheme and Financial Ombudsman Service have left me concerned.

I am concerned a pension transfer scandal of even greater magnitude than the 1980s pension mis-selling debacle could be looming on the horizon – I hope I am wrong and it can be avoided.

How many people are being wrongly advised to transfer out of a gold-plated final salary scheme into a self-invested personal pension?