Recently DevDosh Ltd just found that the Financial Conduct Authority has called for more stringent rules on financial service companies that offer advice to customers on the switching of their pensions from a defined benefit pension to investment performance related schemes.
This comes as the FCA has seen a significant rise in poor advice given to clients regarding their pensions.
Changes in pensions came about back in 2015 when the government made it possible for people to cash in pensions and invest the money into other areas like alternative investments, before these changes consumers were restricted to using the pension pot to purchase an annuity that would pay a fixed income for the remainder of their life.
These rules meant that people could move money from defined benefit, or final salary schemes, which also pay a fixed income for life, into alternative investments such as defined contribution pensions.
In DevDosh Ltd opinion, the amount of money contained within these defined benefit pensions are at all time highs meaning it makes for a very tempting prospect to place the money into an alternative scheme such as a property fund.
DevDosh Ltd believes that the FCA are putting forward a case for the adviser to be held personally responsible for any advice given to make sure they are acting in the best interest of the client, under current regulations the advisor is only required to give a transfer analysis that show the value of the benefits the customer is giving up.
“This does not represent a softening of our approach, but makes it clear that is essential for an adviser to demonstrate that an individual will benefit from giving up a valuable pension.”
Most consumers will be best advised to keep their defined benefit pension, the FCA said.
“Our new approach should better equip advisers to give the right advice so that consumers make well-informed decisions,” FCA executive director of strategy and competition, Christopher Woolard, said in a statement.
Almost a 11 million people in the UK belong to a private sector defined benefit scheme, according to The Pensions and Lifetime Savings Association as many as 50% have requested a transfer of their funds in the last 6 months.
The FCA is conducting research into wheather there should be clearly defined experience and qualifications for someone to qualify as a pension transfer specialist.
After the pension debacles of the late 80’s and early 90’s people are obliged to take professional financial advice if they wish to transfer a pension pot of 30,000 GBP or more.
The watchdog will publish its new rules by early 2018.
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