I have been thinking a lot about risk recently and am frustrated by the glacial pace of change in some key areas.
Firstly, scammers are still highly prevalent, with virtually no meaningful progress in stopping the tide. I accept part of this may be perception, as I am inundated with adverts from pension liberation fraudsters, in part, I suspect, due to my attempts to investigate further the false promises they make.
The Pensions Regulator has stated there could be close to 800,000 single-member SSASs in existence. On one hand, these members do not enjoy the legal protection afforded to other pension schemes and the SSAS is the principal tool of the liberator; however, to ban them would be disproportionate, as they remain a useful tool for a number of owner-managed businesses.
Meanwhile, I have written at length on the issues that could mean we face a perfect storm of negative factors around final salary transfers.
My expectation is that the result of CP17/16: Advising on Pension Transfers, will be for the standard of advice to increase, but at the expense of complicating the process for the average firm. This is not necessarily negative, as such advice is multi-faceted. I would also welcome the new transfer value comparator and appropriate pension transfer analysis complementing the existing use of critical yields.
Compartmentalising this advice has always been difficult, as the nature of a decision to give up safeguarded benefits should always be holistic, and I suspect this will be a further outcome. But this consultation is only the beginning. I hope the FCA, TPR, the Department for Work and Pensions and other interested parties will begin to work closer together.
Mandating partial transfers will stop the decision to transfer from being binary. What makes it harder today is that a member is often forced to transfer their entire benefits and I think trustees see partial transfers as a burden.
This does not need to be the case, as mechanisms exist for transfers in divorce and, as a transfer out is commonly a voluntary de-risking of the scheme, it could be to the benefit of all interested parties.
The other spectre of pension freedoms – unrestricted access beyond age 55 – has not disappeared either, with £10bn reported to have been taken out under the new rules since 2015. Half of these pots were cashed in totally and it may be some time until we see the ramifications of this.
Of course, a major source of instability (and indeed risk) comes from the Treasury’s incessant tinkering with pensions. Let’s see if the Autumn Budget passes over the area this time around.
I have always tried to have “the serenity to accept the things I cannot change” but with a background heavily influenced by pensions and the planning around pensions, I feel I must endeavour to have a positive influence if there is any possibility.
It will require regulators and legislators to make the most significant changes but, where possible, financial planners can rally in the direction of positive change on transfer reform.
It might be a little late for a response to the FCA’s advising on pension transfers consultation paper but I would welcome anyone to get in touch.
Alistair Cunningham is director of Wingate Financial Planning