Pensions 

How to avoid the pitfalls of advising on pension transfers

  • Consider how to build up a detailed knowledge of the rules and regulations around pension transfers.
  • Understand how to better engage with and know your clients and their needs.
  • Learn how to deliver a recommendation.
CPD
Approx.30min
How to avoid the pitfalls of advising on pension transfers

Pension reforms have led to an increasing need for access to high quality and appropriate pension advice, both generally and specifically relating to 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.

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.

Keep up to date with the release of FCA consultation papers. These set out current thinking, highlight the latest issues on the FCA’s radar and signpost where there could be changes to the rules further down the line.

Keeping abreast of these will help you to follow best practices even before they become part of the regulations. That is a great way to manage future compliance risks.

CPD
Approx.30min
  1. According to the London Institute of Banking and Finance's own research, what percentage of consumers over 50 approaching retirement have taken financial advice?

  2. Changes to the TVAS calculation are planned for when?

  3. The author suggests fully assessing soft and hard facts with clients. Which one of these is not in this list of facts?

  4. The author suggests when discussing intended retirement age, research among over 50s shows they can often be quite what?

  5. When it comes to delivering a recommendation, is the following statement true or false? "Don't consider having another adviser check the assumptions and your reasoning."

  6. The author suggests not relying on overuse of wording such as what?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Consider how to build up a detailed knowledge of the rules and regulations around pension transfers.
  • Understand how to better engage with and know your clients and their needs.
  • Learn how to deliver a recommendation.

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