The FCA and the Financial Ombudsman Service are preparing to enter talks with the industry over pension transfers amid concerns professional indemnity insurers are taking an overly cautious stance in the wake of the new freedoms.
The issue of transfer advice has been brought to the fore by Chancellor George Osborne’s pension freedoms reforms. Under rules set out by the Government, anyone with safeguarded benefits worth £30,000 or more must take regulated advice before transferring their pension pot.
Most advisers remain unwilling to process transfers following a negative recommendation, leading to frustration among savers wanting to access their cash.
The regulator and the FOS are preparing to hold discussions with the Financial Services Compensation Scheme, PI brokers and trade body the Association of Professional Compliance Consultants.
APCC chairman Kevin Parkinson says: “There will be a meeting to discuss the pension freedoms in the coming weeks.
“For PI brokers this is a very high risk market. On insistent clients, the regulator and the ombudsman are saying you can do it on an individual basis, but it is untried and untested because there has been no complaint to the FOS yet.
“We are in a grey area at the moment. Fraud has almost tripled in the first month since the freedoms were introduced so we need to keep this issue on the agenda.”
Threesixty managing director Phil young says PI insurers are failing to distinguish between good pension transfer advice and bad advice.
He says: “At present we think PI insurers have a binary view based on product rather than the quality of advice, and perceive pension transfer advice as very high risk regardless of the quality of the advice given.
“A big part of that perception is based on their belief that FOS treat complaints in that way and automatically find for the complainant in all transfer cases. Both FCA and FOS give us a much more sensible view, but we need their help to deliver that message direct to the insurers.
“The FCA have been very proactive on this already with a number of useful public statements on insistent clients.”
Threesixty wants to see a voluntary code of practice created for advisers who adhere to high standards.
Young says: “The code of practice would confirm they are committed to a full and thorough advice process, and distinguish them from those looking to take shortcuts.”