Large employers are increasingly using third parties to review financial advice given on transfers from defined benefit pensions, according to a report in the Financial Times.
It found that a number of financial advice firms seeking to offer advice for larger corporate pension schemes have being asked to have transfer advice reviewed by an independent third party.
Tesco has recently appointed a third-party governance provider to monitor the transfer advice given by two firms providing retirement support to members of its pension scheme.
These moves suggest that there is growing concern, from trustees and sponsoring employers, about the number of people switching out of DB benefits since the introduction of ‘pension freedom’ reforms, and whether this could be another mis-selling scandal in the making.
Getting advice independently verified may act as some protection should legal action arise as a result of these problems.
Pension freedom rules give savers access to pension savings from the age of 55, although those in DB schemes need to take advice first if the transfer value exceeds £30,000.
Over the past year the Financial Conduct Authority has warned about unsuitable advice in this area. Its investigations suggest that up to £20bn of transfers might have proceeded on unsuitable advice.
Many in the industry remain concerned that savers in DB schemes are tempted by the high transfer values on offer, but risk running out of money in retirement if they transfer and forfeit guaranteed pension benefits.