Significant scrutiny by the Financial Conduct Authority is one of a range of pressures that could lead to a reduction in the number of pension transfer specialists in the UK, according to the head of international technical sales at Old Mutual International.
During a Federation of European Independent Financial Advisers (Feifa) seminar in Spain, David Denton spoke about the issues surrounding pensions, including transfers.
He pointed out that interest from clients for advice on preserving benefits “continues to be strong” and the demand for “knowledgeable advisers is growing”.
However, he said factors; such as the high cost or lack of availability of professional indemnity (PI) cover, increased self-invested personal pension scheme (Sipps) complaints, and “significant” FCA scrutiny, could lead to a reduction in the number of pension transfer specialists (PTS).
In May, pension transfer specialist O&M Pension Advice confirmed it would cease advising clients after it ran into “unexpected difficulties” with its PI insurer.
According to Denton, the FCA is constantly looking for higher standards of advice, which now requires a “two broker model” with an overseas adviser working closely with the UK PTS.
In October, the UK regulator confirmed that PTSs will need to hold the Level 4 qualification for providing advice on investments, from no later than 1 October 2020.
However, according to Peter Bradshaw, director at Selectapension, there shouldn’t be any need for worry.
Bradshaw said to International Adviser: “From our database there’s no evidence to suggest the number of pension transfer specialists is reducing.
“In fact, the number of customers who use our defined benefit tool increased in 2018.
“However, the number of defined benefit transfer cases is likely to slow down during 2019 as the FCA continues its review work on the transfer arena, with the aim of achieving a target of over 90% of the cases they review being deemed suitable.”
Steven Cameron, pensions director at Aegon, also believes the pension transfer sector demand continues to “far exceed supply” and for the market to work effectively, “this needs to be addressed”.
Cameron told IA: “We accept that firms offering such advice are facing issues obtaining PI insurance and the ongoing FCA suitability review may be concerning others.
“However, we need to separate problems of the past from ‘what good looks like’ going forward.
“The FCA has set out clearly what its expectations are in this area and this should significantly reduce the risk of future advice being found unsuitable. In time, this should flow through into lower PI premiums.
“We are very hopeful that, over 2019, we’ll see an increased not a reduced number of advisers active in this market, which is what’s needed to provide a valuable service to the many thousands of individuals wanting help assessing whether to transfer their DB pension.”
Recently, IA reported that the UK’s Department for Work and Pensions (DWP) had opened an inquiry into contingent charging by advisers for defined benefit pension transfers.