Scottish Equitable’s veteran pension guru Stewart Ritchie is alarmed that IFAs might find themselves carrying the can for complaints arising from employees who get sweeteners to leave defined-benefit pension schemes early.
What’s more, Ritchie has warned the FSA and The Pensions Regulator about the situation where companies want people out of DB schemes to reduce liabilities and may be pushing too hard for people to do so.
He says IFAs brought in by the companies – as they are required to do – who advise those scheme members may find themselves in a difficult situation.
The individuals may want to leave the scheme, the employer will certainly want them too, but perhaps it is best advice to do everything possible to persuade the client to stay in.
The implication is that IFAs may be the ones who get sued or hauled in front of the ombudsman years hence.
Ritchie warns that it is almost impossible to tell what the best advice is, other than with the benefit of hindsight, and all advisers know just how badly they have fared at the hands of Government and regulator on such occasions.
Writing in this week’s issue of Money Marketing, columnist Robert Reid says IFAs should not advise on these schemes and says these inducements are bribes. He believes advisers should send the employees back to their human resources departments with some difficult questions.
Money Marketing finds it difficult to argue with two such influential and experienced pension professionals from the provider and adviser sides.
Some might suggest that allowing employers to manage down their liabilities could be for the greater good but in all these situations any unfairness affecting individuals only serves to drag down the reputation of pensions as a whole at a time when it least needs it.
IFAs should not be made the scapegoats. The next time that the Government messes up, as it has done with ASW and other collapsed schemes, it will not have the luxury of saying the small print told people they should seek advice. There won’t be enough advisers to go to.
The regulators need to give some guidance urgently.