Pension warning bells sounded: the week in news

Pension warning bells sounded: the week in news

It has been a week for the history books as environmental campaign group Extinction Rebellion hit the streets of London and Downing Street announced Boris Johnson and Irish prime minister Leo Varadkar had agreed they "see a pathway to a possible deal" in Brexit talks. 

Closer to home the pensions market was on the receiving end of complaint-fuelled pressure, as it emerged the number of defined benefit transfer complaints received by the financial ombudsman was up 44 per cent, and advisers were urged to check advice given before 2014 after hopes of overturning the Berkeley Burke court ruling were dashed. 

It's time for the week in news. 

1 Pension transfer complaints up 

It was the tune of a defined benefit market which has come under increased regulatory scrutiny and largely shunned by professional indemnity insurers in recent months. 

According to a freedom of information request by consultancy Duff & Phelps, the number of transfer complaints in this area received by the Financial Ombudsman Service has risen 44 per cent in 2018/19. 

The Fos received 798 complaints relating to pension transfers during 2018/19, of which 39 per cent were upheld, compared with 2017/18 when the ombudsman received 553 complaints, with a 30 per cent uphold rate.

This comes after data from the Financial Conduct Authority showed in June some 69 per cent of transfer clients have been advised to transfer out of their DB pension since the introduction of pension freedoms in 2015.

Mark Turner, compliance and regulatory consulting managing director at Duff & Phelps, said the data sends a "clear message that the DB transfer market is very much under the eye of the regulator". 

2 Check pre-2014 Sipp advice 

Following a decision to drop the Berkeley Burke Sipp appeal case by its administrators last week, advisers are now warning the move could have wider implications for the advice profession. 

Advisers wanting to avoid Financial Ombudsman Service complaints have been warned to check advice given to self-invested personal pension clients before 2014, with warnings the focus was now back on advice given before the FCA published finalised guidance for Sipp operators in 2013 and a Dear CEO letter in July 2014 setting out its tougher stance against providers.

Due to Berkeley Burke dropping its appeal as a result of funding issues, the original Fos decision which ruled adviser-style due diligence should be carried out by Sipp providers now stands. 

Garry Heath, director general at adviser trade body Libertatem, said he was concerned similar complaints may be made against advisers, especially where they have not advised on the unregulated investment in the Sipps.

He warned: "There is a danger where an adviser has organised a Sipp to be created but has not given advice on the investment, as quite often the investment comes sometime after, because the Fos has been attempting to come after the advisers in this instance."

3 'Disastrous' pension tax proposal

The pensions sector heard more warning bells this week as the industry heavily criticised proposals made by a think tank to scrap pensions tax-free cash and fund the abolition of inheritance tax instead.