Savers told by financial advisers that they cannot transfer their “final salary” pensions – even if they are fully aware of the risks – have been granted unexpected support by the City watchdog and Treasury.
Under Government rules you must seek financial advice if transferring a final salary pension, also known as “defined benefit” pension, where the entitlements are valued at £30,000 or more.
Transfers have grown in popularity because moving money into “defined contribution” schemes (the more common pension arrangement) allows greater choice over how to make withdrawals from pension pots. The ability to dodge inheritance tax is another benefit of the latter schemes, as reported here last week.
But savers have found advisers unwilling to help them transfer if they deem it not to be in their best interests.
Now the Financial Conduct Authority – which oversees financial advisers – has issued new guidance for advisers confirming that they should help what the industry has dubbed “insistent clients”. These are people who want to pursue something irrespective of advice not to do so.
The move follows another supportive paper, published in June, laying out similar guidance to advisers suggesting they should make it easier for savers seeking to move their money.
Many people are advised against the move because their final salary plans pay generous, guaranteed incomes rising with inflation. This is difficult to value, as the ultimate benefit will depend on how long the retiree lives.
As a result advisers are extremely cautious about recommending a transfer.
But the FCA’s guidance should help savers struggling to complete a transfer.
The watchdog reiterated that “where a client has received a personal recommendation they may choose to take a different action to the one that was recommended”.
It set out guidance for advisers to follow when helping people who want to act against their wishes, including requiring savers to state in their own words that they understand the implications of going against advice.
Richard Freeman, of Old Mutual Wealth, a provider of pensions and financial advice, said the guidance helped ease the “catch-22 situation”.
He said: “Common sense seems to have prevailed. As long as the original advice meets normal regulatory requirements, and the drawbacks of pursuing an alternative path are made clear, advisers can still support insistent clients.”
According to recent estimates around 210,000 people have moved money from final salary schemes over the last two years. At least £50bn of pension money is thought to left schemes as a result, but that still leaves well over £1 trillion of assets held by British final salary funds.
For further support on information found in this article or anything on our website please do not hesitate to contact usvbelow.
Oops! We could not locate your form.