Draft guidance from The Pensions Regulator will not protect advisers from conflicts of interest when advising on transfer sweeteners, warns IFA Robert Reid.
The leaked guidance addresses the growing practice of employers offering cash inducements to employees to persuade them to leave defined-benefit pension schemes.
Syndaxi Financial Planning managing director Reid says it stresses the need for independent advice but does not address the problem of the potential conflict of interests of employers being allowed to hire IFAs to act on behalf of the scheme while also advising pension scheme members.
The guidance outlines issues for employers, trustees and scheme members to consider. It says the member’s attitude to risk is crucial when transferring to a higher-risk defined-contribution scheme. Possible tax implications for members who accept inducement payments should be considered.
Reid says: “I am very disappointed the paper does not address the clear conflict of interest of an IFA hired by an employer advising the scheme members.”
But he says that if the suggested guidance is followed, employers would be less likely to offer inducements and employees would be less likely to take them.
President of the Faculty of Actuaries Stewart Ritchie says: “IFAs need to be seen to be acting in the best interests of the members.”
The final guidance is provisionally scheduled to be published next week.
The Pensions Regulator declined to comment.