View more on these topics

Caution is urged on DB transfers into stakeholder

The ABI is issuing its members with guidance notes to curb fears of widespread misbuying as members of occupational pension schemes transfer their defined benefits to stakeholder.

Life offices and IFAs fear that the requirement to allow transfers from all other pension arrangements to stakeholder creates the potential for misbuying by defined-benefit scheme members who fail to take advice before transferring.

It is unlikely to be in the best interest of members of DB schemes to transfer into money-purchase schemes such as stakeholder. However, members may not be alerted to this hazard if they shun advice and choose the execution-only route or use decision trees.

The ABI is considering asking the FSA to issue a pamphlet explaining the potential risks of transferring. In the interim, it has issued guidance notes for its members on types of transfer and the levels of caution that stakeholder providers should communicate to customers.

The ABI states that life offices dealing with high-risk transfers, such as those from DB schemes, should communicate the message: “It is extremely unlikely to be in your best interests and we strongly recommend that you take advice.”

Skandia head of pensions marketing Peter Jordan says: “While stakeholder providers are welcoming with enthusiasm stakeholder business, they should be thinking about putting certain people off and pointing them strongly in the direction of advice.”

LM Financial sales and marketing director Mark Howard says: “It is important for providers to take the lead. The last thing the industry can afford is a misbuying scandal.”

Informed Choice managing director Nick Bamford says: Stakeholder remains cheap, not simple, and you would be extremely naive to think otherwise.”

Recommended

Ernst & Young appoints banking tax partner

Ernst & Young is appointing Jeremy McCallum as a banking tax partner in its financial services department.McCallum was formerly a solicitor with Linklaters and Coudert Brothers, where he was an international tax partner. He also worked for Credit Lyonnais and Morgan Stanley.Ernst & Young head of financial services David Cannon says: “We are delighted to […]

Compulsory purchase

The Government&#39s flagship pension project has finally been launched after a lengthy and controversial development process. The introduction of price capping amounts to arguably the biggest intervention in the free market of this Government&#39s administration and the price-capping features will doubtless be noted by other professions across the economy. The launch comes just as IFAs […]

Floodgates open for part-timers

Ten years ago, I was encouraged – or obliged – to study certain legal cases involving pensions to pass Pensions Management Institute exams. At the time, I considered this a complete waste of time, knowing (or at least believing – wrongly as it has turned out) that I would never become involved in pension law. […]

L&G launches 3 year fixed rate mortgage

Legal & General is launching a mortgage fixed at 5.25 per cent for three years for borrowing up to 75 per cent loan to value. After three years the loan returns to L&G&#39s standard variable rate, currently 6.35 per cent.The mortgage has flexible features including overpayments without redemption charges, underpayments and payment holidays. Although redemption […]

The investment clock

While Trump blazes blond in the political foreground, it’s easy to overlook the economic background to the new political dimension of 2017. Political risk will be a feature of the year: the unpredictable and untested Trump administration has already created uncertainty, which is unlikely to diminish, especially if protectionist rhetoric starts to outweigh promises of […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment