The Personal Finance Society expects “a significant number” of advisers to pull out of the defined benefit transfer market due to rising professional indemnity insurance costs and the effects of the coronavirus lockdown.
Keith Richards, chief executive officer of the PFS and chair of the Pension Advice Taskforce, said more than 1,300 advisers signed up to its transfer gold standard in the past year but “a significant number” are expected to not re-register as they give up transfer permissions.
Mr Richards said: “The hardening of the PII market, and the prohibitive cost this has imposed on advisers, has meant some members dropped their permissions to advise on defined benefit pension transfers and come off the gold standard register.
“Undoubtedly, the coronavirus will have a further impact on advice businesses and access, meaning that further government attention needs to be given to pension freedom legislation.
“The significant falls in equity values make it both more expensive for trustees to fund transfers and more challenging for consumers to invest transferred funds – these factors are likely to significantly reduce demand for both advice and transfers.”
The PFS’s gold standard asks firms to commit to a set of standards in managing defined benefit transfers.
It was launched on April 9, 2019 alongside a guide to help the public better understand what to expect from a regulated financial adviser who carries out a DB transfer.
Mr Richards said it was vital for people to be able to access affordable advice, especially when deciding whether to transfer out of a DB scheme, but he called for there to be a fairer system when funding consumer protection.
He said: “A more effective and sustainable solution for savings and investment monetary protection and education levy can be achieved by pooling the cost at the highest level funds under management.
“This would mean the entire investment sector would spread the cost of just a few basis points, pooled with sector fixed levy contribution’s to create a sustainable solution which would negate the need for PII and also help to protect against the increasing scourge of scammers.”
This week (April 21), the Financial Conduct Authority warned advisers they must still renew their PII as normal despite the current coronavirus crisis.
The regulator said it was aware some financial advice firms were concerned the pandemic and national lockdown may affect their ability to renew cover.
But the watchdog said its own discussions with brokers and insurers had "given no indication" that the crisis was preventing the latter from renewing policies, with the FCA instead stating professional indemnity insurance "remained available" in the market.
Meanwhile, research from PanaceaAdviser has found 18 per cent of advisers have asked for government support to help them through the virus crisis while 14 per cent warned that unless they were able to secure additional funding, their businesses would fail.