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DB transfer complaints down since pension freedoms

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The Financial Ombudsman Service has seen a significant fall in defined benefit transfer complaints since the introduction of the pension freedoms.

Experts say the trend is likely to reflect advisers’ cautious approach to DB transfers caused by concerns the advice may later be deemed unsuitable by regulators.

The FOS says it received an average of 20 complaints per month relating to DB transfers during the financial year 2014/15. However, since April that has fallen to an average of seven per month.

The FOS says the complaints it receives about DB transfers relate to advice given as far back as the 1980s.

Law firm Foot Anstey partner Alan Hughes says: “The number of complaints relating to old advice is bound to fall off as there will simply be fewer such cases around.

“Also, advisers may be shying away from giving DB transfer advice as it is perceived as high risk by the regulator and therefore professional indemnity insurers. So if less of such business is being transacted, the fall in complaints may be tracking that trend.”

In July Hargreaves Lansdown had to stop taking on DB transfers after being overwhelmed with demand for advice.

Head of pensions research Tom McPhail says: “We were experiencing very substantial demand, but we are now taking on relatively few DB transfer cases.

“Our advisory team is deliberately not taking on cases unless they think there is a decent chance of a positive recommendation, because we don’t want to waste people’s time and money.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Compliance Thought 19th October 2015 at 12:21 pm

    How can HL decide on whether a case has a ‘decent chance of a positive recommendation’ without going through a full discussion with the client including analysing the results of the TVAS. If the advice is not to transfer then according to COBS, this has to be given in writing, I wonder if this is happening or are they bailing out mid advice process?

  2. Ok- this seems very wrong. Advice NOT to transfer when a consumer SHOULD be transferring is just as bad as giving advice to MOVE when a consumer SHOULDN’T- and to do that as a short-cut by only taking people who look like it will be proactive- so by default giving advice without a full assessment looks like a very poor TCF scenario. I do realise that giving advice is expensive but surely that is better than doing it wrong- would it be better to send educational collateral to them, make them have discussion with Pensionwise and then if they want advice- get on with it whether positive or negative?

  3. Transferring out of my DB scheme was a minefield and it would have cost me £15,000 with one firm, fortunately I managed to find a well established company in Leicester that are doing for a fraction of that price.

    I now own a Ferrari and have blown the rest on women & booze! (That obviously isn’t true but a dig aimed at those that felt we couldn’t/shouldn’t be trusted with our own money).

  4. Maybe just coincidence but timing seems to be when FCA brought in transfer permissions?

  5. COBS 9.4.1 R (4) says, “A firm must provide a suitability report to a retail client if the firm makes a personal recommendation to the client and the client:

    enters into a pension transfer, pension conversion or pension opt-out. ”

    It does not say you have to issue an SR if they are not going to change the status quo.

    There is also nothing to stop a firm declining to advise (other than compliance with the Equality Act).

    I also think HL is right that there are circumstances in which it quickly becomes apparent that it is unlikely to be in the best interest of the client to transfer and charging them for what is likely to be a fruitless exercise seems at odds with Principle 6.

    • COBS 19.1.9G08/06/2015: If a firm proposes to advise a retail client not to proceed with a pension transfer, pension conversion or pension opt-out, it should give that advice in writing.

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