The PFS is calling for a solution to “this growing problem”, where clients instruct advisers to facilitate a pension transfer against their advice, by requiring an independent risk warning from the trustee.
This warning would include confirmation that the client has instructed a transfer against professional advice, making the client responsible for their own informed decision and indemnifying the trustee, adviser and the Financial Services Compensation Scheme, against any future compensation claim.
Latest research
The PFS said its latest research backed this up, where more than 1,100 advisers responded in its 2015 annual member survey to a specific question on insistent clients.
This revealed that 81% of advisers said they would refuse to facilitate a defined benefit pension transfer if they deemed it not to be in the best interests of their clients.
However, 16% said they would consider a transfer in line with Financial Conduct Authority guidelines and just 1% would do so on the basis of not wishing to turn a client away and into the unregulated advice arena.
That left 2% who were willing to comply on all occasions in support of the new pension freedoms.
Poor consumer outcomes
PFS chief executive, Keith Richards, said such conclusive statistics underline the potential for conflict between the principle of total freedom of choice and providing the best outcomes for consumers.
The PFS first raised concerns with the UK Government and FCA back in March 2015, highlighting the need for greater protection and clarity for the public and the advice profession, stemming from the unintended consequences of the pension reforms.
“We stressed the need to develop a pro-active solution before the risks force everyone’s hand,” he said, adding that earlier this month he had discussed the matter with the Department of Work and Pensions.
“Our survey shows that advisers do not want to get caught up in facilitating poor consumer outcomes, let alone carry the unlimited liability which comes with it and the uncertainty of future regulatory action. Urgent change is therefore needed to allow consumers who are insistent on making their own informed decisions to accept the responsibility of doing so.”
Richards also pointed out that more than half of the PFS members surveyed had been approached to facilitate defined benefit to defined contribution transfers without advice.
“Faced with a refusal, clients naturally become angry and confused; frustrated by what they see as a conflicting restriction to prevent them accessing their cash,” he said.
“They have been led to believe that it’s ‘their money, their choice’ and cannot understand why the overwhelming majority of professional advisers will not provide a facilitation service.”
