Pension scheme trustees should be forced to appoint a financial adviser to assist their members with retirement decisions and pension transfers, a prominent industry figure has said.
Margaret Snowdon, president of Pensions Administration Standards Association, told FTAdviser that she is supportive of The Pensions Regulator intervening in this area, as a way of giving members some direction when looking to get financial advice.
Since the British Steel debacle, more trustees and employers have appointed IFAs to support members that want to transfer out from their schemes, with Sony and Michelin trustees being a recent example of this trend.
Ms Snowdon believes TPR should give a strong nudge to trustees to have such a policy in place.
She said: “Pension schemes should at least appoint an IFA, which the member is not obliged to use. But if the individual wants to, at least the option is there.”
Ms Snowdon, who was involved in producing the new guidance for pension schemes and administrators on defined benefit transfers – which stated this process should take no longer than 10 weeks to carry out – noted there were occasions when the trustee or the sponsor of the pension fund should be paying for the advice.
She said: “If it’s an exercise that will benefit the scheme, such as enhanced transfer value exercise to reduce risk or to cut costs, the employer should pay for the advice.”
She also noted that the Financial Conduct Authority has made it clear that trustees or employers cannot be blamed for the advice given by an IFA to a member in these cases.
A TPR spokesperson said: “We are supportive of trustees putting mechanisms in place to help savers make good decisions about their retirement planning, including the provision of IFA services where resources allow.
“The Personal Finance Society’s pension transfer gold standard can help ensure that any advice which is provided is of a high quality.”
TPR is expected to increase its guidance in this area, as it is working on a guide for trustees to provide appropriate support to members who are considering a pension transfer.
This will be part of a wider content hub for trustees which are facing an employer restructuring or changes.
A cross working group has also been created for the trustees, which is led by TPR and includes officials from the Pension Protection Fund, the FCA and the Money and Pensions Service.
This web hub will include case studies and examples of best practice, a list of warning signs at different stages of restructuring, and improved guidance on what good looks like.
FTAdviser reported in February that there are a mere 10 IFA firms in the country deemed suitable to be hired by pension schemes for pension transfer advice, due to the scale of the task at hand.
Yet when a pension scheme appoints a financial adviser to assist their members with a pension transfer, the cost of advice can be slashed by up to 75 per cent, according to experts.