Who is at fault for the current pension transfer problems?
A recent research on pension transfers by the Financial Conduct Authority (FCA) has created an agitation on whether the blame for the present transfer problems in the pension board is solely because of the recurrent problems of the FCA itself or the advisers.
The FCA released its take on the matter in the early days of December, which was titled “Key findings of our recent work on pension transfer.” In the press release, they made known their disappointment in the findings which revealed that less than fifty percent of the advice they reviewed were suitable. Although they added that those results were based on their targeted work and not a representation of the entire market surveyed.
Also, the review covered the processes of 18 firms and looked into the advice those firms gave on 154 transfers. It was revealed that there were lower than half advice that were suitable, 74 (48.1 percent), 45 (29.2 percent) were unsuitable and 35 (22.7 percent) were unclear.
The regulator compared these results with results of previous works and found out that 49 percent of the advice was suitable, 33 percent unsuitable and 18 percent unclear.
Other factors that can contribute to the present transfer problems in the pension board include:
• A change in data set
It has been argued by advisers that although the numbers are inconsistent, there has been a significant improvement in the figures if the worst offenders are stripped out.
The statistics used has also been scrutinized by professionals such as the Personal Finance Society (PFS), who have voiced out their concerns regarding the report. They pointed out that the report contained a sample review that is insufficient.
Providers have also showed concern regarding the same issue. The director of Aegon Pensions, Steven Cameron said that even though the headline statistics in the latest publication by FCA doesn’t appeal to the eyes, they are skewed by some other firms that have different permissions.
• Advisers failing to deliver in their field
Rory Percival, who is the past regulator and now the leading compliance consultant, wrote in his site that the blame should solely be on the advisers. He added that the notice sounds threatening and even frustrating to the listener, because of the various problems it has found.
He also said that people expect the FCA to act in a certain way, or act quicker, but it is not entirely their fault. It can also be the fault of the advice sector, because it is their area of expertise since they are designed to offer suitable advice. But they have failed at doing so, often been inconsistent.
• The regulators are less proactive
Not all regulators see the problem to be only because of advisers. Some of them agree that firms specialised in making transfers don’t do so with enough zeal, which can lead to mis-sold pension compensation claims.