Michelle Cracknell has joined the chorus of critics of the defined benefit (DB) transfer advice requirement, saying it was "a very blunt instrument" and represented a "market failure".
Under current rules, implemented as part of the government's pension reforms, defined benefit savers who want to transfer out of their valuable schemes in order to benefit from pension freedoms must seek regulated advice if the value of their pot is more than £30,000.
FTAdviser learned some trustees will ask for adviser sign off regardless of the pot size and so will the receiving schemes, leading to criticism from some advisers.
Ms Cracknell, who heads pension guidance provider The Pension Advisory Service (Tpas), criticised the rigid rule, saying it needed reform to be brought in line with what consumers need and want.
She said she understood the regulator had to do something to protect consumers following the pension reforms but stated the fixed threshold was too "blunt".
She said: "If I had a pound for every customer who has phoned us up to say 'how can I get around taking regulated advice because my pot is £32,000 I would have a huge pension fund."
Tpas sees customers who have pots worth a mere £25,000, not enough to warrant mandatory advice and yet they would really need it, she said.
On the other hand there were people with £100,000 who sought guidance who have significant money elsewhere and really didn't need her service's assistance.
Ms Cracknell said: "There is a market failure at the moment because if you have a pot of £35,000 and you are being told that you've got to spend £3,000 on regulated advice that is just not commercial.
"We have people who phone us up whose state pension is perhaps £6,000 per annum so for them a £30,000 pot actually will make a difference in their income that is worth them thinking about and they really should get help on it.
"But they obviously need to have that help at a price that is commercially viable, which the regulated market, understandably, isn't (able to provide).”
She called for the rule to be revisited and said one option would be to increase the limit to closer to £100,000 with mandatory guidance from £30,000 onwards.
She also proposed to have a type of means test question in place that would determine who needs advice and who doesn't something she thought would be "relatively straightforward" to implement.
This could entail personalised questions about people's other income and benefits, for instance.
Tpas will be merged with Pension Wise and the Money Advice Service into the new single financial guidance body during the course of this year.
Ms Cracknell did not say whether she had applied for the top job at the new body, recruitment for which is currently underway.
But she said greater cooperation and referrals between the bodies was already underway.
The new body may be tasked with carrying out default guidance but the government has so far refused to commit to making this mandatory.
Ms Cracknell said she was for the introduction of default guidance, whereby consumers would effectively need to either take or opt out of taking guidance before they could access their pots.
But she did not back any form of mandatory guidance, saying the reaction from people when they are told to do something was typically to try and do the opposite.
She said: "People don't like being told what to do but if you can encourage them in the right way most human beings think they would be foolhardy not to."
But Paul Stocks, financial services director at Dobson & Hodge, warned of tinkering with the advice rules in light of the recent problems around pension scams.
He said: "I understand the concern of cost of advice versus benefit if a fund is £30,000 but at what point does the risk of detriment outweigh the cost of advice?
"In a world where there is a huge amount of concern about the British Steel experience, where large numbers rushed for the exits, I suspect the floodgates would really open if those with values up to £100,000 have the ability to transfer out without advice.
"I therefore feel it is for the FCA, government, Department for Work & Pensions and The Pensions Regulator to decide to what extent intervention or safeguards are needed to potentially stop individuals from making what is often perceived to be the 'wrong' decision.
"Means testing is fine from a relative point of view, i.e. can the individual afford to take this risk, but it doesn't help from an absolute point of view, i.e. is it a good risk to take?"
carmen.reichman@ft.com
