Michelle Cracknell, chief executive of guidance body The Pensions Advisory Service, said in recent months her organisation has seen a surge in requests for cheap pension transfer advice.
Speaking at FTAdviser’s Unpackaging Pensions event on 4 October, Ms Cracknell said immediately post pension freedoms the bulk of enquiries her service saw were about pulling cash out of small pots.
She said last year most calls were about whether a pension pot was safe due to consumers being scared as a result of the demise of the BHS pension scheme but this year most people wanted to know whether they should take the transfer value being offered by their defined benefit scheme.
Ms Cracknell said: “There is a market failure in that particular [defined benefit transfer] area.
“One of the unintended consequences of pension freedoms and the need for advice on defined benefit transfers is people calling us and wanting us to point towards an adviser who will only charge £100 and sign-off what they wanted to do.
“It is a slightly backward step. People feel they are being told to get advice and are a bit grumpy about that.
“They are just seeing these mouth watering numbers and thinking they have never seen amounts that big. Our job, and your job, of bringing them back from that situation is then very hard.”
Ms Cracknell said her guidance body staff explained to callers that an adviser would not simply rubber stamp their request and the importance of the need to consider their individual circumstances in order to make sure they ended up with the right retirement income solution for them.
Keith Richards, chief executive of the Personal Finance Society, said it was disappointing that the government hadn’t done more to explain that advice around pension transfers was important and needed to be paid for.
He said: “It is also disappointing that the government has said you must get advice on a defined benefit pension transfer if you have more than £30,000 and then said you can basically ignore that advice.”
emma.hughes@ft.com
