Acumen has welcomed news of the Financial Conduct Authority’s (FCA) plans to strengthen rules on pension transfer advice, which should help to protect retirees in the new climate of pensions freedom.
A staggering seven million people with Defined Benefit (DB) pension schemes in the UK are due to retire after April 2015. While a further 2.8 million people with private sector DB pension schemes will be eligible for retirement in the next ten years.
Many of these prospective retirees have what used to be regarded as ‘gold standard’ Final Salary pension schemes and up to 400,000 of them are expected to retire in any given year. Thirty per cent of those who do retire may consider transferring their pensions to take advantage of the new ‘Pensions Freedoms’ due to take effect next month.
This is a hugely important area and one that the FCA is rightly concerned about. Like us, they recognise that it is vital for anyone thinking of changing their pension to get the right advice. So we are delighted to hear the recent news that they are planning to strengthen rules on pension transfer advice.
Independent advice an important protection
The FCA will now only permit advisers who are authorised as Pension Transfer Specialists to advise clients on the pro’s and con’s of moving their retirement fund from a DB pension. They have said that the government’s incoming pension reforms make advising on pension transfers “significantly more complex” and, in future, all advice on these transfers must be given by specialists who are both qualified and authorised to work in this area.
FCA director of strategy and competition, Christopher Woolard, said the new pension flexibilities increased choice for consumers, but that DB scheme transfers posed “particular issues.”
We need to ensure that those who are considering moving away to other arrangements are fully aware of the potential benefits they are giving up,’ he said. ‘In many cases transferring… may not be in the member’s best interests and ensuring independent advice is taken is an important protection.
The FCA is also set to widen its definition of a pension transfer as it currently only includes certain types and if a transaction falls outside their definition, but still involves moving pension benefits from one scheme to another of the same type, it is known as “pension switching.” They now want to close this loophole.
Acumen is approved to advise on pension transfers
Firms like Acumen Financial Partnership Ltd, who already have FCA permission to advise on pension transfers and pension opt-outs, will automatically be able to advise on these transfers. The regulator said scheme members seeking a conversion or transfer from DB to Defined Contribution (DC) schemes will need to provide a letter from their adviser, as proof that they have taken appropriate independent advice, and this will act as important protection to clients.
Acumen Financial Partnership has been authorised to advise on this very complex area since 2006 and we are always happy to welcome enquiries from new clients. Angela Maher, Acumen’s resident ‘Pension Transfer Specialist’, works closely with the firm’s other advisers to provide this very important advice to clients. She has been a guest on Radio Merseyside on several occasions to talk around the subject and stresses the need to seek independent advice from an experienced and qualified professional.
She says: “It is a huge relief that the FCA has recognised the need for proper regulation in this area. I just hope that the new rules are not too long in coming because the decisions people will be asked to make at this time in their life could make or break a lifetime of savings and planning. It is essential that everyone gets the specialist advice they need.”