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PFS chief warns ‘insistent’ pension transfers risk FOS complaints

Personal Finance Society chief executive Keith Richards warns advisers that process “insistent” defined benefit to defined contribution transfer requests post-April risk opening themselves up to ombudsman claims.

Any saver who wants to ditch their DB scheme for a DC plan to take advantage of the new pension freedoms will be required to take advice before transferring. Speaking during a Money Marketing debate on the reforms, in association with Scottish Widows, Richards said advisers should not process a transfer request if the client chooses to ignore a recommendation not to move their savings pot.

He said: “One thing advisers should be very aware of is neither the FCA or FOS recognise insistent clients when you are taking paid for, professional advice. Anyone that feels they want to rely on an insistent client declaration, I would strongly advise you not to.”

Wingate Financial Planning director Alistair Cunningham said his firm has been approached to “rubber stamp” DB to DC transfer requests.

He added: “Fundamentally it is not going to be in most people’s interests.”

Richards suggested insurers could look to develop technology-led simplified advice models to serve clients with smaller pension pots in the wake of the new freedoms. However, investment consultancy Gbi2 managing director Graham Bentley said: “Call me old fashioned but when I hear people talk about simplified advice I think about simplified cardiac surgery. I’d rather not, thanks.

“I can see how an investment management process can do work in a robotic fashion for an individual but I find it difficult to envisage an algorithm that is complex enough to take somebody through their tax position and, in particular, the bedside manner that’s involved in the process.”

Risk warnings

In a separate session, experts warned customers are at risk of being confused by a lack of consistency in how providers give risk warnings when they try to access their pensions.

Last month, the FCA published rules for a second line of defence to catch people who do not take financial advice or use guidance service Pension Wise.

But Talbot & Muir head of technical support Claire Trott said the rules should have been more prescriptive so customers are given the same warnings and information no matter which provider they go to.

She said: “I think some of the risk warnings should have been stipulated because then if you go to two different providers and have the same conversation and answer the same question you get the same responses, whereas I feel you’ll get different information from different providers using different jargon and people will be confused.”

But FCA head of investment policy David Geale said: “We’ve put the rulings out saying the areas they must cover, the sort of things that must be addressed but allowing firms scope to do that in their own way – but the results should be the same.”

He added: “There’s two dangers with scripts – there’s the chance you miss something, and people just switch off.”

Geale also said providers and advisers do not need a “safe harbour”.

He said: “There are a serious of risks that come with these freedoms but ultimately firms and advisers should stick behind what they say, if they’re telling the customer to do something they should take liability for that.

“This debate seems to get caught in that question of what people are asking for is the ability to give advice without liability and I don’t think that should happen.”

Non-advised drawdown

In a session debating the future of the drawdown market, Scottish Widows head of pensions market development Iain Naismith said providers must offer a non-advised service to customers to stay competitive following the pension freedoms.

He said: “Almost all providers will have to look at non-advised drawdown. I don’t think there will be capacity in the advice world to take everybody. And the cost will be off-putting for some people. If for people with relatively modest amounts we can make sure they go in with their eyes open, they understand what they’re doing, the risks involved then I believe a non-advised proposition can work in drawdown.”

But Key Retirement associate director Billy Burrows said it is “too difficult” for most people to go into drawdown without advice.

He added: “The elephant in the room is the advice gap. I can understand why people are attracted to non-advised drawdown but I think we need to look at some in between no advice and full advice and under current rules and regulations it’s just not possible.”


Association of British Insurers retirement policy manager Rob Yuille warned providers are “between a rock and a hard place” when it comes to preventing pension scams post-April.

He added: “They would like to block transfers to the schemes they expect to be fraudulent, but they don’t have the legal protection to do that.

“We could need to see a change in the law there.  Providers will do whatever they can to warn people of the risks, and signpost people to advice. But there is also the risk that fraudster claim they are giving advice, or Pension Wise guidance, and that needs to be stopped as soon as it possibly can.”

You can watch all four pension freedoms debates here.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. The insistent client scenario highlights once again the prudence of charging a fee ~ upfront ~ for the provision of advice. If you don’t and the client doesn’t like your advice not to do something, it may be very difficult to get him to pay you for it after you’ve done the work. You may have to take him to court.

  2. Christopher Lean 19th March 2015 at 7:32 am

    My concern is that less scrupulous firms will complete a transfer analysis and recommend a transfer does not take place. Then, “someone” coaches the client how to be an insistent client and the business is transacted. I think Keith Richards is right to highlight this issue.

    There has been a considerable amount of pension transfer activity offshore, mainly into QROPS, and offshore firms will have to work with UK FCA regd firms with pension transfer permissions. I suspect there may be a view offshore that this is a rubber stamping exercise- it is not.

    Providers need to up their due diligence on all of this.

  3. We seem to all be singing from the same hymn sheet here.

    An insistent client will go on to insist that you take responsibility for their stupidity and that you compensate them for it.

    And those scammers who looked out for IFAs to be the fall guys for their fraudulent UCIS will be looking out for them to be the fall guys for something promoted as pension freedom.

  4. I would suggest that advisers familiarise themselves with COBS 19.1.6 which clearly states the starting position to be adopted when considering a transfer from DB to DC, and these rules apply to everyone.

    COBS 19.1.9 then instructs you to give your final recommendation, nowhere does ” Insistent Customer ” feature. Effectively they are people who come to you for advice as a professional, then disagree with you if they do not get the answer they want. Technically they are not catered for in the rules and only a fool or a cowboy would entertain them.

  5. Christopher Lean 20th March 2015 at 9:04 am


    It is the fools and cowboys that are of concern here. The FCA need to keep an eye on this.

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