As part of my normal pension fact finding I ask about the source of the pension fund that has been built up, especially if it's a large value. This helps me to understand if the client is a saver or if they have benefited from employer contributions. It's all part of the getting to know your client.
I am increasingly coming across pension funds that have built up from transfers out of defined benefit (DB) schemes actioned by the trustees with what appears to be without advice.
In three recent cases, the scheme members were offered an uplift incentive to transfer within a limited time frame and it was all very rushed. The offer included financial advice paid for by the company but the financial advice was only to purchase an annuity - there was no consideration of drawdown.
For the advice firm this must have been a Godsend as benefits that move from safeguarded to safeguarded do not need to go through the regulated specialist transfer process.
But is this really giving advice or is this just facilitating a transfer out on behalf of the employer firm? Is it fair to the scheme member who had been diagnosed with cancer and was undergoing treatment?
With such uncertainty drawdown should be considered as an option, but it was not even mentioned to the member.
In another recent case the member was offered a transfer value into a personal pension as the scheme was going into wind up. Why did the trustees think the member would know what wind up means?
The offer again had to be accepted within a short time frame without the offer of advice - although the member was advised to get advice, but who pays for that? There was no explanation of what wind up meant nor of the implication of a personal pension.
Employees tend to trust their employer and in general do what is being suggested. This scheme represented most of the members' working life, so wind up might have been the correct solution.
Another case, which is the worst I have seen, was where the deferred pension was £20,000 and the current transfer value is about £120,000; I'm staggered at the injustice. The scheme was transferred out, then transferred again to another provider within weeks; you could have been forgiven thinking that it was part of money laundering scam, except the firms involved are well known.
There was no cash equivalent transfer value (CETV), no transfer value analysis (TVAS) report and no-one can find a suitability report. How can any of these clients be in an informed position to make the right decision?
Susan Hill is a chartered financial planner of Susan Hill Financial Planning
