Professional indemnity insurer Liberty won’t be accepting any new business in the defined benefit space, saying it doesn’t want to increase its exposure to the 'high-risk' area.
A spokesperson at Liberty said after reviewing its exposure to the Financial Conduct Authority’s ongoing pension transfer review, the firm took "the difficult decision to cease offering cover for DB pension transfers for any new clients for the time being".
Current clients will continue to get cover from the insurer, which will only take on new business from firms that don’t provide DB transfer advice.
The spokesperson said: "Our underwriting approach for existing clients remains unaltered.
"However, increasing our exposure to this high-risk area during this period of uncertainty wouldn’t be prudent and could ultimately have a negative impact for our clients by potentially putting the future of the account at risk."
The move comes after Liberty implemented an "interim measure" after the increase in the Financial Ombudsman Service award limit from £150,000 to £350,000 in April, while it assessed the regulator's changes.
As part of this the insurer agreed to cover policyholders for the full £350,000 in the event of an award under the Fos.
However, this interim measure won't apply to any DB pension transfers transacted after April 1 - which the insurer said would need to be underwritten on an individual basis.
FTAdviser reported at the end of April that Liberty had decided to take into account whether an advice firm has adopted the Personal Finance Society’s Pension Transfer Gold Standard when underwriting insurance policies.
Liberty stated at the time that it would ask firms that want cover for DB transfers going forward whether they have achieved or applied for the gold standard, and stressed it would be one of the conditions affecting the PI policy.
Steven Cameron, pensions director at Aegon, noted that for many people, their DB pension is their most important asset.
He said: "It’s vital that those individuals who want to weigh up the pros and cons of transferring have access to advice.
"But advisers need PI cover to do so and the decision by Liberty to pull out of the DB market for new clients is very worrying, indeed not just for advisers but for members who might benefit from DB advice."
The FCA published in June the results of its survey of 3,015 firms between April 2015 and September 2018, concluding that too much of the advice on DB transfers it has seen was "still not of an acceptable standard".
It also voiced concern about the volumes of recommendations, with 69 per cent of clients having been recommended to transfer.
The watchdog found the average transfer advice value was £352,303, equivalent to a total value advised on of £82.8bn. This included both actual transfers and advice against it.
The FCA is concerned that firms are recommending that large numbers of consumers transfer out of their DB pension schemes, despite its stance that transfers are likely to be unsuitable for most clients.