The Personal Finance Society has warned many of its members are struggling to find professional indemnity insurance cover for pension transfer advice.
PFS chief executive Keith Richards tells the Financial Times the pension freedoms are in danger of being “de-railed” if advisers continue to face problems getting adequate PI cover.
Richards says many of the PFS’s 37,000 members are now struggling to secure PI insurance.
Richards tells the FT: “We have cases where an adviser was declined renewal of their [professional indemnity] cover, with the insurer explaining they were reducing their exposure to any future [defined benefit] transfer claims. The adviser then managed to secure alternative cover but at a significant hike in his premiums.”
Zurich said last week it would stand by its decision to withdraw most of its PI insurance offerings from IFAs, but did not confirm whether DB transfer risks were behind the decision to drastically cut the PI cover.
According to Money Marketing research, sixty per cent of advisers believe personal indemnity cover is too expensive, while 40 per cent saw their bills increase at last renewal. Around half of financial advisers have PI renewal periods lasting one year or less.
The FCA has increased its scrutiny of defined benefit pension transfers following the British Steel Pension Scheme saga, with nine advice firms so far stopping pension transfer advice.