A government requirement to seek financial advice for defined benefit transfers above £30,000 is causing a market failure, Michelle Cracknell has warned.
The chief executive of The Pensions Advisory Service was speaking at a DB pension transfer conference yesterday (19 June).
She was referring to a rule introduced as part of the pension freedoms legislation in April 2015, meant to safeguard those seeking to transfer out of their defined benefit retirement pots and into a defined contribution scheme in order to access all of their cash in one go.
She said: "The £30,000 limit is causing a market failure and there are people who cannot find financial advisers for pots of £40,000.
"There is no reason why you as financial advisers should do business if it is not commercially viable.
"It might be that the FCA should look at other mechanisms to provide protection."
She said that the £30,000 limit is "arbitrary".
Ms Cracknell added: "There are just as many people below £30,000 who would benefit from guidance as there are above £30,000 for whom a DB pension is neither here nor there because they have other benefits elsewhere."
Concern over soaring demand for pension transfers - and the risks they may pose to advisers and clients - have dominated debate in the financial advice market for months.
The FCA is currently looking into the practice, and is due to publish a consultation paper on the issue tomorrow.
Demand has also been driven by record transfer values, which have been soaring in the 10 months since the EU referendum thanks to plummeting gilt yields.
According to Xafinity's most recent figures, average transfer values now stand at around £241,000 for a pension worth £10,000 a year at age 65.
That's £30,000 more than the same pension was worth on 1 June 2016, before the UK voted to leave the European Union.
damian.fantato@ft.com
