The Liberal Democrats have called for contingent charging on pension transfers to be banned because it is “against the public interest”.
Stephen Lloyd, the Liberal Democrat spokesman for work and pensions, argues it is impossible for advisers to give impartial advice when the adviser only gets paid if the consumer chooses to transfer out.
This mirrors the conclusion from the report MPs on the work and pensions select committee produced on British Steel which said contingent charging should be abolished.
Lloyd says: “While the vast majority of advisers seek to act honestly and in the interest of clients, the distress caused to many British Steel pension workers recently shows that there are rogues in every industry.
“One of the roles of Government is surely to protect consumers from such sharp practice. This is especially true when people’s hard-earned retirement savings are at stake.”
He notes that many financial advisers have denounced contingent charging and the FCA have described the practice as “a higher risk approach.”
On the issue of contingent charging, as well as a plan to strengthen the ban on cold calling, Lloyd says the FCA are the only show in town in terms of their expertise in these areas “and shouldn’t feel they have their hands tied by politicians if they want to take action.”
He adds: “On the current Financial Guidance and Claims Bill wending its way through parliament, it is currently in committee stage, the Liberal Democrats have been pushing hard for all pensions and claims management cold calls to be banned.”
In mid-February National IFA also LEBC echoed MPs’ calls to ban contingent charging on defined benefit pension transfers.
Surveys suggest that half of IFAs are still charging on a contingent basis for DB transfers, however.