View more on these topics

DB transfers: ‘The buck stops with IFAs’

Advisers will hold the liability if advice is judged to have been unsuitable, a panel at MMI Harrogate says

Financial planners have been urged to thoroughly review how they conduct defined benefit transfer advice.

A panel of experts at the Money Money Interactive conference in Harrogate this morning said that, in light of recent FCA action in the area, it was clear advisers would hold the liability if advice is judged to have been unsuitable.

Head of pensions and long term savings at law firm Pinsent Masons Carolyn Saunders says “the buck stops with advisers” when it comes to DB transfers.

She adds: “I certainly don’t see any policy of Government appetite to restrict transfer activity.” 

Red Circle Financial Planning director Darren Cooke questioned the motives of large providers now entering the DB transfer space through either executing advice or offering advisers transfer value analysis services.

Cooke says: “There’s a reason the insurance companies are out there. They deny it, they say they are just trying to help IFAs cope with demand. Rubbish. They’re after the money. They’re after the funds under management. They’re after the AMC.

“If there’s another pension mis-selling scandal in five years’ time they aren’t the guys paying the bill this time. You are. It’s your responsibility as an adviser to get it right. It’s your PI. It’s your company reserves that will go. It’s you that will be out of a job and out of the industry. It’s you who will be paying the FSCS bill.”

Nigel Chambers, director at pension specialists CTC Software, said that while the FCA still held the belief that transferring would be inappropriate for the majority of clients, an increasing number now had a compelling case for transfer.

He said: “When the FCA wrote that they probably thought the majority was 70 to 80 percent. I’d say it’s now more like 52 per cent, or 50 plus one.”


DB transfer suspensions: Where are they now?

After a raft of firms have been forced to suspend defined benefit transfer business, advisers are still little clearer over when services will resume. Demand for DB transfers is still running high, but finding enough support for the workload has become problematic with a number of firms either having permissions suspended or voluntarily agreeing to […]


News and expert analysis straight to your inbox

Sign up


There are 7 comments at the moment, we would love to hear your opinion too.

  1. Since when were advisers not liable if their advice is subsequently judged not to have been correct? This is hardly news.

  2. IFAs are being set up as the fall guys – and they are stupid enough to walk right into the trap.

    Even if you’re not involved, you’ll still pick up the tab because the bad guys will have folded their tents and we’ll be paying for it through the FSCS levy.

    FCA wins – because it can say ‘we tried to discourage this.
    Government wins – because their naked pensions freedom tax-grab will have worked
    Insurers win – because they’ll have the funds and the AMCs

    There’s only one loser here and it’s the IFA’s – who are doing Hammond’s dirty work for him.

    Plan your escape now people.

  3. Sorry but neither the FCA nor Nigel are taking into account one simple thing. How many clients are going to want to take an annuity? With annuity rates where they are and life expectancies where they are, for how many clients is an annuity even appropriate?

    Not many… The FCA’s existing entire viewpoint rests on the assumption that a client is going to annuitise at retirement, which is now blatantly highly unlikely to happen.

    Yet all the numerical assumptions many people use revolve around an effective net return rate (if annuitised) of nearly zero for generating income in retirement.

    Now compare the numbers if the the assumed rate of return (after charges) for generating income in retirement was even only 3%?

    I’m transferring my own DB scheme right now, in simple terms, I am comparing an income of £1,850pa (todays value), vs a transfer value of £50.5k.

    If I only achieved 5%pa between now and retirement in 20 years time, that would still more than double the comparative fund value against the income value (which will escalate in line with inflation). So in effect I’m comparing a transfer value of £100k against an income of £1,850pa.

    I would also put the point out that anyone saying “don’t transfer” simply because of some “numbers” that are effectively meaningless, is also vulnerable to an upheld complaint.

    If your going to advice on DB transfers, you need to both know your stuff, understand how the schemes work, have ways of providing clients with a balanced viewpoint and actually provide the advice as to what is in the clients best interests, NOT what is the regulator’s current flawed pre-conceptions.

  4. “A panel of experts ………………said that, …….it was clear advisers would hold the liability if advice is judged to have been unsuitable.”

    Furthermore, no doubt the experts said the Pope is a catholic etc etc

  5. CTC made one of the two main software systems for the last pension review and, I imagine, rather a lot of money out of it.

    Just assume that if your client ends up worse off you WILL get a complaint and unless you can show that they understood the risks and it was reasonable for that client at that time to take it, the complaint WILL be upheld.

    Assume too that when they start coming in, your insurer will exclude DB transfers from the next renewal.

    Assume that if you are not trading under limited liability, FOS WILL award redress against your personal assets and if you are in partnership with your spouse, FOS will award redress against them personally if you are no longer alive or have been declared bankrupt.

    Finally, assume that the FOS limit will go up to at least £250,000 and, in due course, £500,000 and the on to £1 million.

    It will probably go beyond that eventually but at least the Lifetime Allowance will restrict the loss.

  6. Carolyn Saunders says “the buck stops with advisers” when it comes to DB transfers. It always has, and to rub salt into the wound it falls on us even when it was another adviser who gave the advice and then goes under unable to settle the claims. And we question why there are not more young people wanting to enter the profession.

  7. Didn’t like CTC. RECAL was much better.

Leave a comment