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Ritchie warns of sour ‘sweeteners’

‘It is perfectly clear who is going to get sued- the IFA’s’

Pension guru Stewart Ritchie says IFAs will be made the scapegoats for yet another misselling scandal if employees complain they lost out by accepting “sweeteners” to transfer out of final-salary schemes.

Aegon director of pensions development Ritchie says the relatively new practice of employers offering inducements to reduce their pension liabilities is placing IFAs who advise on them at risk.

Ritchie says employers are being encouraged to hire IFAs to advise their employees but he argues this creates an obvious conflict of interest, with some employers pressurising IFAs to persuade employees to accept the sweetener.

He says IFAs are left in an almost impossible situation as the decision whether the employee would be best served by accepting the inducement or remaining in the scheme is incredibly complicated. He says pressure from the employer may “tip the balance” in favour of recommending the sweetener.

Ritchie, who says he has repeatedly tried to get The Pensions Regulator and the FSA to investigate the problem, warns that IFAs could be hit by a future wave of transfer incentive misselling complaints.

He says: “If it turns out that members are disadvantaged and it is only really possible to tell this with the benefit of hindsight, it is perfectly clear who is going to get sued – the IFAs. There is serious potential for IFAs to be made the scapegoats. IFAs need to be very careful not to get sucked in by this.”

Former pensions adviser to the Government Ros Altmann says: “It is grossly unfair but the buck will stop with the IFA as always. The FSA is very good at saying you should not have done something in hindsight.”

A spokeswoman for The Pensions Regulator says it is producing general guidance for trustees and members.

She says: “Trustees are not doing anything illegal. Members need to be made aware of the differences between schemes and the benefits that they are giving up.”

FSA spokesman Robin Gordon Walker says: “We can’t decomplicate the nature of transactions. We have already produced guidance on this.”

Comment, p43

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