Earlier this month we looked at the proposed new checks coming into place for pension transfers to try to combat scams and fraud.
More proposals are now emerging, including the suggestion that pension trustees should consider referring clients to “preferred” advisers. This could open a can of worms. It is unlikely that large pension trustees would be prepared to look at smaller independent advice firms as their “preferred” advisers because they would be unable to service large numbers of retiring clients needing advice. That would mean that trustees could only consider the big advice firms. That then creates more problems.
Firstly, most of the bigger advice firms are not independent or whole of market.
The Pension Ombudsman is keen that “preferred firms” should be both. But why?
It is a question of responsibility and potential liability. If trustees recommend the big, tied firms they are at risk of being held responsible for restricting client’s options. Lots of the big firms run their own in-house funds which often do not perform well and also often have some of the highest charges. So, in an attempt to help clients, they may well be sending them to the “worst” options available to them.
Secondly, many retirees already have ongoing advice relationships with Independent Advice firms most of which are likely to be smaller firms. If trustees prevented clients using their existing adviser that would raise all sorts of issues with restraint of trade and restriction of choice.
It is unlikely that trustees will want to get potentially tangled in these kinds of issues.
I would suspect that trustees will resist these proposals and continue to leave it up to the clients to find their own advisers, keeping the responsibility for transfer decisions with them.