A pension transfer specialist has been forced to close down after it was unable to find professional indemnity (PI) cover at “commercially acceptable” terms.
O&M Pension Advice, which is a trading name of Independent Pension Analysis Limited, announced it was to shut its doors to new business today (2 May), saying a hardening of the PI market in the wake of the British Steel fiasco had meant it could not find adequate cover to continue trading.
FTAdviser understands recent problems with advice on defined benefit pension transfers have led insurers to either introduce clauses that exempt them from covering transfer advice, hike excesses or price their policies accordingly.
O&M Pension Advice operated an independent, introducer only model and did not charge fees on a contingent basis, which is cited as a potential concern by the Financial Conduct Authority (FCA) with regards to pension transfer advice.
The firm had joined Phil Billingham’s Perceptive Planning as an appointed representative late last year after leaving the Tenet network, and was on its way to becoming directly authorised when the holding company of its PI insurer went into administration.
Mr Billingham said the problem was insurers, which were already nervous about pension transfer risk, would view the firm’s exposure to the transfers as too high and its size as too small.
“The focus has been an issue,” he said. “They offered very high excesses, so then you have a license to trade but it doesn’t really protect the business at all.”
According to Jason Wykes, who ran the firm until January, it has never had an advice complaint since it was formed in 2014.
It underwent a full review of its service and processes by the regulator in 2017, which resulted in only minor process changes, he said.
Mr Billingham felt insurers had been trying to help but were unable to shrug off recent experiences from the British Steel fiasco, where multiple firms were implicated in supposedly giving bad transfer advice to workers and are now facing claims.
And there is further pressure on the horizon with the FCA looking to force insurers to accept claims against their insolvent clients.
He said: “It’s a bad time in the market for that cover. It’s a very nervous marketplace, it would have been different six months ago and it will be different in six months’ time.”
The firm’s PII broker, Jamie Newell, director of O3 Insurance Solutions, said: “It’s just very unfortunate that with the current spotlight on DB transfers by both the FCA and PI insurers that obtaining commercially acceptable PI insurance has proved fruitless.”
The firm will now enter a period of orderly rundown and will cease giving advice on 1 July.
Mr Billingham said: “Whilst this will be difficult for everyone, especially our fabulous staff, we will be working hard to ensure that we give the best advice we can to as many of the clients we have been introduced to as possible.”