How to avoid the pitfalls of advising on pension transfers

Although most welcome the reforms, the first few years following the introduction of pension freedoms have not been plain sailing for consumers or advisers.

There has been a lot of negative noise recently about consumers getting ripped off – with some figures putting losses at around £91,000 each time.

And the London Institute of Banking and Finance's own research among over 50s tells us that only 20 per cent of consumers approaching retirement have taken independent financial advice.

So many consumers do not seek advice when they should, which means they risk getting poor outcomes.

The Financial Conduct Authority (FCA) and the Pensions Regulator have recently launched an advertising campaign targeting older pension savers and highlighting common tactics the scammers use.

If you are a pension adviser, or thinking about becoming one, there are some key areas you need to take into account when advising on pension transfers.

They are urging consumers to seek advice, but also to check the credentials of the advisers they go to.

But survey after survey tells us that consumers often lack the confidence to go to a financial adviser in the first place, let alone know how to check credentials.

So for pension advisers there are some huge mountains to climb – first, building trust and confidence among clients, particularly if they are new to you; second, helping them to navigate the maze of complex rules and regulations that apply; third, ensuring your knowledge is as up to date as it can be and, finally, ensure they get a good deal.

If you are a pension adviser, or thinking about becoming one, there are some key areas you need to take into account when advising on pension transfers.

The guidance in this article is a starting point for those interested in becoming a qualified pension transfer specialist, or those already advising, who want to refresh their knowledge.

It is not intended to replace the guidance given by the regulators.

Always make sure your knowledge is up to date and check the regulators’ latest guidance for any updates.

Current thinking

Firstly, as a pensions adviser you need to have detailed knowledge of the rules and regulations.

Be familiar with the appropriate sections of the FCA Handbook (COBS 19). These set out the rules advisers need to follow in detail and advisers need to ensure they understand every element.