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Growing concern over FS transfer advice

IFAs and pension specialists are becoming increasingly concerned about the pitfalls of advising on transfers from final-salary schemes as the number of schemes winding up increases.

Advisers warn that the priority given to staff already retired at the time of a scheme&#39s wind-up means that many people approaching retirement are being left with little more than the guaranteed minimum pension when a scheme is wound up.

Alan Pickering&#39s review into pension simplification last month proposed improving the situation for people approaching retirement by giving them priority above younger employees.

But under the present rules, IFAs run the risk of advising a client to stay in a final-salary scheme, only to see it wound up and the client get far less benefit than they had expected.

Scottish Equitable director (pensions development) Stewart Ritchie says: “People approaching retirement age whose final-salary schemes are closing are finding that a lot of what they thought they would get will not in fact come to them.”

Syndaxi Financial Planning principal Robert Reid says: “The priority rule means that if you retire one day after the scheme closes, you can end up with far less than the person who retired a day earlier.

“It used to be that if the client had a final-salary scheme, you usually advised people to stay there.

“Now you need know whether the scheme plans to close but they have no obligation to let you know.”

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