Constant reinvention of the pension advice wheel

Before the Retail Distribution Review there were countless surveys showing the average man on the street thought financial advice was free because they never wrote a cheque for it.

Back then, many advisers were paid for their services via commission paid by providers whose products were recommended.

Post the Retail Distribution Review and pension freedoms, which have resulted in advice to figure out how best to accrue a pension pot and make it last a lifetime being needed more than ever before, nobody can be under the misapprehension that advice is cheap these days.

Before Easter, the advice wheel was reinvented yet again and the price tag for advice pushed further up when the Financial Conduct Authority (FCA) published new rules for defined benefit transfer advice.

More needs to be done by the regulator than just coming up with new rules.

There is much to praise in the FCA’s new defined benefit pension transfer rules, which tries to prevent a repeat of advisers offering British Steel employees chicken in a basket dinners in a bid to get their hands on their defined benefit pension pots.

Any plans to further boost the quality of advice should always be praised.

But the sad reality is raising the game of advisers operating in this area means the price tag of advice continues to soar higher and this will probably further shrink the pool of individuals willing to help people trying to figure out how to avoid an impoverished retirement.

The Financial Conduct Authority also revealed it is considering a ban on contingent charging that makes payment for advice dependent on the client going through with a pension transfer.

The introduction of new qualifications for advisers is also being contemplated as well as obliging firms to produce suitability reports even when the recommendation is not to transfer.

All of these new requirements will have an impact on firms' expenses and how much they have to charge people considering ditching their defined benefit pension pots.

The cost of offering defined benefit pension transfer advice is set to soar by up to £10,000 per pension adviser in just the first year of proposed new rules being introduced, the regulator has calculated.

Unless the government simplifies the pension landscape significantly to make it easier for the average member of the public to navigate, then more needs to be done by the regulator than just coming up with new rules.

While it is vital that the regulator ensures top quality advice is delivered it is also vital more fresh blood is encouraged to enter this industry too.

The Financial Advice Market Review delivered more robo-advisers but what we really need are more human ones capable of going to see employees who are petrified their employer is going under and who need help to make sense of what that means for their hopes of retirement.

emma.hughes@ft.com