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Advisers need full PI cover to get quality badge

Advisers need full PI cover to get quality badge

The Personal Finance Society's 'gold standard' will only be available to advisers who have professional indemnity insurance cover that meets FCA threshold conditions.

According to the terms of application, advisers must have the insurance in place, as well as "adequate resources to cover any excesses (or exclusions) under the policy under the relevant sections of IPRU-INV13.0" of the FCA handbook. 

The gold standard badge and guide is a new initiative brought to life by the Pensions Advice Taskforce, a group set up by the PFS to increase consumer awareness and protection in areas of complex pension advice.

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This followed the fallout from the closure of the British Steel Pension Scheme in 2018, which led to consumers being lured in by cheap deals offered by unregulated entities and rogue advisers.

The limit for awards from the Financial Ombudsman Service was raised from £150,000 to £350,000 at the start of April, causing difficulty for advisers approaching their renewals as insurers were slow to adapt their policies to the new limits.

The Personal Finance Society admitted the timing of the recent increases in the ombudsman’s compensation limits "isn’t ideal", but stated it expects the adoption of the gold standard to be "viewed positively" by the PI market. 

But it stated: "Given that the regulator has warned personal investment firms must take out PI insurance which provides cover for ombudsman service awards made against the company, (either through insurance alone or a combination of insurance and additional resources),  this is by default an automatic requirement to adopt the gold standard and would need to cover the new threshold of £350,000 for complaints that relate to business transacted after 1st April 2019."

The badge sits alongside the new standard, which is linked to an adviser code based on nine principles underpinning good practice when giving pension transfer advice.

It is the first initiative the taskforce has delivered as part of its role in the delivery of sound, ethical financial advice with respect to safeguarded and defined benefit pensions.

It emerged in February pension schemes will be asked to send a copy of the consumer transfer guide to members when they request a transfer value.

The taskforce, which includes former pensions minister Sir Steve Webb, now director of policy at Royal London, and former Financial Conduct Authority technical specialist Rory Percival, is also made up of representatives of scheme trustees, financial advisers, pension providers, compliance consultants and PI insurers, as well as the new guidance service the Money and Pensions Service. 

Keith Richards, CEO of the Personal Finance Society, said: "In an often-cynical marketplace, perpetuated by a minority who can impact the perception and reputation of the majority, the Pension Transfer Gold Standard is about raising consumer awareness and redressing the knowledge imbalance between firms giving advice and consumers seeking and taking it, especially those who are mandated through pension freedoms. 

"It is important that consumers are initially guided to make an informed decision before engaging a financial adviser for the first time, which we believe will also better support financial advisers giving advice.