View more on these topics

Claire Trott: Legacy problems plague pension freedom reforms

Claire Trott Talbot & Muir

I have been harping on that the pension reforms and guidance guarantee are being pushed through too quickly, which will be at the detriment of the consumer. I do believe that the ideas and eventual outcome of these reforms will be of real benefit to most people.

The current issues come from all the historic messing about with pension legislation and it is these past changes that are going to be the most complex part to deal with in the interim.

If no one changes anything in the next 40 years or so everyone should be on the same level playing field and guidance may actually be able to deal with real life cases. But I will not be holding my breath on that. I do not even expect it all to be the same come this time next year, particularly if we have a major change in government in May.

Wise or unwise?

The launch of the Pension Wise website has caused a flurry of discussion – firstly about the misleading inheritance tax information and also about the six steps giving an overview of the guidance process.

For the layperson, those six steps make sense: you see how much you have and what you want going forward, then choose a retirement option. For the rest of us that have worked in pensions for some years, we are well aware it is not as simple as how much money you have in your pension fund. It is more about what the schemes you have actually offer you in terms of benefits.

Those retiring now may have benefited in the past from such things as enhanced accrual of tax-free cash, guaranteed annuity rates, as well as the protections options available in the scheme at A-day. If you just look at the value of the fund, this will all be missed.

The website does push people towards guidance and advice but the fact it all has to be over-simplified will lead to people believing it is all as simple as it looks and they are fully capable of making the most appropriate choices without any advice or even guidance.

On the defensive?

If you need a second line of defence you have already decided the first line is not going to work, which is not really a good starting point. While writing this, details of the second line of defence have only been issued in a press release and a letter for providers. It states that we as providers have to ask questions and, based on the responses we receive, give the relevant risk warnings to the consumer.

It is less than two months until the reforms come into force and we are yet to see the detail of what these questions will comprise of. I fear that by the time someone asks to take their benefits and has chosen not to use the guidance service or take regulated financial advice, then how willing are they going to be to listen to their provider, or even answer their questions honestly in the first place? The apathy on these types of questionnaires tends to go down the route of “no must be the right answer to get my benefits”. I am just as guilty for not wanting to disclose things I feel are irrelevant and may be preventing me getting what I want quickly.

Education is key

Providers are lucky in a way. We will have all the options available in April for those that want to access their fund or change their death benefit nominations, so the issues of transfers and advice regarding them is limited. However, even though the majority of our clients have come to us with an adviser, some have become orphaned over the years and we need to make sure we are protecting them as best we can.

The second line of defence, although flawed in my opinion, does give us another chance to engage with clients so they have had access to information that flags up issues such as the levels of tax they will pay and other implications of their actions. This contact needs to be written in plain English to ensure it is easily digestible and acted on if needs be. We choose to work with advisers in the first instance and will push clients to speak with them at every opportunity, and I believe other providers will be doing the same. We need to assume responsibility, taking the requirements from the FCA and Government a step further to deal with the issues specific to our clients.

Claire Trott is head of technical support at Talbot and Muir 



Former Arck partners handed 29-year directorship ban

Former Arck partners Richard Clay and Kathryn Clark have been disqualified from directorship for a total of 29 years. In December, Clay pleaded guilty to three fraud charges following a joint investigation by the Serious Fraud Office and Nottinghamshire Police. Clark pleaded guilty in July and October 2014 to three fraud charges and two counts […]

Sierra Leone cover image - thumbnail

White paper — Sierra Leone International Insights

Jelf Employee Benefits assesses the areas that employers should be aware of when considering operating in Sierra Leone, including healthcare access, delivery and insurance provisions. This report draws on various sources to highlight specific considerations for this emerging jewel in West Africa.


News and expert analysis straight to your inbox

Sign up


There are 2 comments at the moment, we would love to hear your opinion too.

  1. Douglas Baillie 2nd March 2015 at 1:16 pm

    People who are determined to take all of their pension funds in ‘one go’ as a lump sum, will simply ignore all of the warnings about income tax, transaction costs, penalties, the possible loss of valuable guarantees, and then they will form a queue sometime in the future to complain about their losses.
    But that is not the only risk. Because some people will be tempted by what they are told will be highly rewarding and massively risky ‘re-investment opportunities’. their cash will be transferred and possibly disappear for ever, with no hope of recovery or recourse.
    These ‘opportunities’ will be offered by scammers (UN-REGULATED ‘ADVISERS’), who will promise all kinds of rewards to naive consumers who will be directed towards transferring their pensions across to UNAUTHORISED FUNDS.
    I hope that the Government and the FCA will now take immediate action compel all persons providing investment advice who sell ‘funds’ to become regulated.
    Furthermore, all pension providers, trustees and pension administrators must be legally required to only transfer pension funds across to a list of FCA authorised pension providers.
    Let’s stop this inevitable train crash before it happens,in its tracks now.

  2. Douglas
    “Furthermore, all pension providers, trustees and pension administrators must be legally required to only transfer pension funds across to a list of FCA authorised pension providers.”
    An excellent and profoundly sensible suggestion but unfortunately the scammers will still get cash direct from clients after they have taken their funds and these are harder to police. Hopefully education to clients , whether via Pension Wise or other channels regarding how to spot and avoid unsuitable (or downright illegal) “investments” will reduce the number of those affected. Unfortunately it cannot be totally stamped out as fraudsters will always thrive where there are greedy individuals prepared to invest in something which is “too good to be true”.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm