As anticipated, enquiries to access cash from both defined contribution and defined benefit funds have been key areas of interest, based on early feedback from both providers and advisers.
Demand for facilitation of a DB transfer is evident and likely to grow steadily as people become aware of the option to access cash, but need advice to do so for pension pots over £30k to satisfy the new rules.
The PFS has raised concerns that short-term gain could result in long-term pain for many who later regret the decision to cash-in the benefits of a DB pension and look for someone to blame. It claims that both Australia and America provide evidence of how flexibility has resulted in retirees running out of both capital and income early into their retirement years.
New rules state that trustees must not transfer benefits until they have received a written request from the member and checked that regulated advice has been obtained from an FCA-authorised adviser.
The member must provide the trustees with a signed confirmation from their adviser, including their FCA registration number. The adviser’s details must then be checked on the FCA’s Financial Services Register before the transfer is made.
The regulator believes it may also be sensible to conduct periodic additional checks - for example through further communication with the adviser - and that any concerns should be reported to the FCA
PFS chief executive, Keith Richards commented:
“The government and regulators are sensibly seeking to mitigate the risk of poor outcomes by ensuring that people take impartial professional advice. But the problem is already emerging where the client is not really looking for advice and just wants the adviser to facilitate a transfer to satisfy the new rules.
“Our guidance to members is clear and unambiguous: not to facilitate activities which go against professional advice and the best interests of the client. Even in exceptional circumstances, with fully-documented risk warnings and declarations, the adviser will carry potential future liability for the outcome - without a time limit.
“This could of course leave consumers frustrated and critical of the reforms. If the Government expect advisers to facilitate transfers, irrespective of their advice to the contrary, there must be a change of process to further protect the client and guarantee that advisers will not be held liable if a poor outcome subsequently materialises.
“Insistent transfers of a DB pension against professional advice should clearly contain risk warnings from the adviser. Therefore, to better protect the client, we have proposed an additional independent warning from the scheme trustee and exclusion from any form of future redress against the adviser, trustees or the FSCS.
“If clients are still confused in any way regarding the advice they have been given, this extra independent warning by the trustee should make them think again before proceeding - further protecting their best interests,” he concluded.
“I agree with the principle that it should be the public’s right to make an informed decision, but they must also accept responsibility for doing so.”
The PFS has registered its concerns and recommendations with the Government and FCA and is currently in discussions with both.
