In recent years, independent financial advisors (IFAs) received the lion’s share of the revenue from final salary pension transfers. They were among the most lucrative services for IFAs with high-charging structures or commission schemes. Pension holders were enticed to transfer out of their workplace’s defined benefit (DB) retirement savings scheme with high cash-equivalent transfer values, which were subsequently re-invested into portfolios marketing improved rates of return. Whether or not these investments began to pay out dividends, the IFAs still took percentages in contingency or annual charges, leaving clients with illiquid investments in untenable financial circumstances.
Final Salary Pension Transfer Crackdown
The financial media has reacted strongly against IFAs that continue to perform final salary pension transfers, and against financial regulators for not responding quickly nor firmly enough to the threat they pose to retail investors. A response from the Financial Conduct Authority (FCA) might have been slow in coming, but it has now addressed many of the existing issues with a slew of administrative changes and actions. Several IFAs linked to final salary pension transfer activity have since gone out of business following FCA action.
A new regulatory guide for final salary pension transfers has been released by former FCA technical specialist Rory Percival. It aims to provide clarity into the new regulatory aspects of final salary pension transfers from a unique perspective. Percival claimed:
‘I wanted to focus very specifically on the regulatory aspects, and try to use my inside knowledge of how the regulator thinks to help advisers understand where the regulator is coming from.’
One of the primary warnings Percival has for IFAs going forward regards the legitimacy of safeguarding procedures. According to the new regulations, even firms that review 100% of their final salary pension transfer files might not be performing business with the necessary due diligence. He believes that simply checking all files may not be suitable practice in isolation, particularly for such high-risk investments. This is because individual advisers are subject to personal biases that they may not be aware of, either in the immediate or the reviewing stage of a final salary pension transfer.
Going forward, Percival recommends IFAs prepare a panel of reviewers for so-called problem cases. He also believed that there were significant shortcomings in the assessment of client suitability. This is one of the enduring pain points of all pension transfer business, not merely DB pension transfers. He claimed:
‘Getting adequate colour and detail about the client objectives is one of the key areas where firms aren’t doing as well as they could do.’
Final Salary Pension Transfer Claims with Money and Me Claims
Money and Me Claims is a specialist financial claims company that was established to help our customers achieve compensation for mis-sold financial products and services. It is a sad fact that time and again people have been encouraged to transfer out of established final salary pensions by manipulative IFAs who have profited from their own clients’ losses.
New regulations mean that the ongoing final salary pension transfer debacle should be coming to a close, with industry experts expecting that the sector could soon be experiencing its peak activity. We want to help you feel the benefit of that, by seeking compensation for your losses. Please contact us if you believe you were mis-sold a final salary pension transfer by an IFA or a scheme provider.