The debate about the cost to consumers of the freedom and choice in pension changes continues. According to at least one national newspaper, consumers are being ripped off by product provider charges, forced to pay exorbitant adviser fees and denied access to their pension pots by the barriers created by said pot providers.
So much for restoring consumer trust in the financial services sector!
Blame for this mess is going to stick to whoever is least nimble. You can safely bet that it won’t be the political classes who take responsibility for this consumer frustration. George will simply claim that he is the good guy by opening up access to pension pots for anyone who wants it.
He will also claim that he has acted in a responsible manner by creating a free at point of delivery guidance service and protecting those consumers with defined benefit schemes and guaranteed annuity rates by insisting that they take advice.
However, this goes against the premise that he trusts consumers with their pension pots. Clearly he does not. If he did then he could simply ask them to sign up to a declaration much like the one I have seen on a product provider’s flexi-access drawdown application.
Where the pension pot owner states they have not received guidance from Pension Wise or advice from an authorised and regulated adviser they agree that:
“You are signing to confirm that you are happy to proceed even though this might not be the most appropriate option as you have received no guidance on your personal circumstances.”
So what is the problem? Well for DB and safeguarded plans (typically GARS) valued at over £30,000 “trusting George” has introduced a compulsion for advice to be provided. Understandably, some consumers feel they are perfectly able to make this decision for themselves. Others are loathe to pay advice fees for something they think is superfluous.
Those of us who have been around the block more than a few times know the risks associated with transferring out of DB schemes and pension pots with certain guarantees. We may well argue, and I think it is a pretty convincing argument, that most people with these types of arrangement do need advice. But should they be compelled to take and pay for such advice? Here I have some doubts. After all if we truly trust people with their own money we need to accept that some will make mistakes.
Quite rightly the intermediary community does not want to find itself liable for rectifying a load of costly mistakes in the future.
The regulatory view of how an adviser might protect themselves from the claim of an “insistent client” at some point in the future is not as robust as they might like to think it is. The Financial Ombudsman Service is as likely to override any FCA view in the future and find against the IFA as it is to find for the IFA. I would not want to be on the receiving end of that complaint.
Just as there will be some “insistent clients” I think the best way to deal with this is to be the “insistent adviser” – just say no and blame the Government.
Nick Bamford is executive director at Informed Choice