Defined Benefit  

PFS warns against pension transfer 'opportunists'

PFS warns against pension transfer 'opportunists'

History must not be allowed to repeat itself when it comes to advising on pension transfers, the chief executive of the Personal Finance Authority has warned.

Keith Richards said it was "really important" the industry does not allow history to repeat itself when it comes to the high pension transfer activity, and result in a future mis-selling scandal.

Moreover, he said the PFS was becoming "concerned" about the way in which a small number of firms were carrying out DB transfer advice, which could lead to enforcement action further down the line or bring the industry into disrepute.

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He said: "We are concerned that a small number of firms are treating pension freedoms as a golden opportunity.

"This could ultimately impact on the whole profession if subsequently found to be unsuitable or formulaic processes used and especially where a conflict of interest is evident.

"Many of our members have also been raising their own concerns about the overly commercially minded few who not only risk tarnishing the reputation of the majority, but it is the majority who will end up funding the compensation."

According to Mr Richards, "Given the sharp uptake in transfers, FCA action is inevitable and we can only hope that our concerns are misplaced."

In June, the Financial Conduct Authority (FCA) has made it clear it is monitoring defined benefit (DB) transfer activity.

Mr Richards commented: "The FCA has stated that it is concerned about some DB transfers practices and has reminded advisers of what it expects to see when transfers are carried out.

"The PFS has been very clear regarding the practice and risks associated with ‘insistent’ client transactions from the outset."

In March, the PFS issued a good practice guide on DB transfers, which Mr Richards said has been well received by members.

"No one should be in any doubt that where there are spikes in activity, the regulator will be required to test the market and consumer outcomes, this is why all advisers engaged in transfer activity should be extra diligent", he added.

His comments build on warnings made by former staff at the City watchdog.

This week, Rory Percival, former technical specialist at the FCA, told a conference that advisers who carry out DB transfer business would need to be "whiter than white", after the FCA confirmed it was carrying out a study into advice on DB transfers.

Earlier this year, a former Financial Services Authority employee told FTAdviser that regulatory action on DB transfers should be expected if the trend to transfer continues at such a pace, without real and appropriate need for them.

David Penney, now a chartered financial planner at London-based Penney, Ruddy and Winter, warned the FCA was concerned about the high levels of transfer requests post-pensions freedoms.