Savers looking to make a pension transfer are not being given the correct advice by financial advisers, the chief officer of the government’s guidance service Pension Wise warned.
Speaking at the Pensions and Lifetime Savings Association (PLSA), Jamey Johnson, who is also deputy director at the Department for Work & Pensions (DWP), says that “it is often difficult for customers to find an adviser that is qualified to give the advice they need”.
He said: “We have spoken to customers on numerous occasions where they've done just that [seek for regulated advisers].
“The adviser they dealt with was registered, but not for this thing [pension transfers], and therefore did not quite have the skills to do what they were actually being asked to do.”
Defined benefit (DB) transfers have been soaring, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into defined contribution schemes in order to access them via the pension freedom rules.
Earlier this month, the Financial Conduct Authority (FCA) disclosed data that shows that advice in more than half of the DB transfers where the recommendation was to move the retirement pot was unsuitable or unclear.
Mr Johnson also argued that the government is “doing enough to help customers” on this, and that this should be an area of attention in the future.
Margaret Snowdon, chair of the Pensions Administration Standards Association (PASA) and also a speaker at the conference, expects that the FCA work on this area will help changing this reality.
She said: “[Customers] have to find an individual [financial adviser] that happens not to be someone who just understands mortgages, but actually understands pensions.
“You cannot be surprised if people just don't get it, if they don't understand the difference.
“But if it is the firm that is responsible, if it is the firm who has to compensate if one of their advisers who isn't properly authorised to practice in this kind of area [gives the advice], then it’s probably one way for this to be limited. Otherwise it seems that nothing is wrong.”
The FCA is currently working on a policy paper on DB transfers, expected to be published in the published in the first quarter of 2018, after a consultation that occurred during the summer.
maria.espadinha@ft.com
