The soaring cost of professional indemnity insurance is impacting consumers ability to access pension freedoms, with a third seeing an increase of more than 50 per cent since last year.
Research from the Personal Finance Society (PFS) found 36 per cent of advisers stated the cost of their professional indemnity insurance premiums had increased by more than 50 per cent, while four in 10 have seen an increase of between 20 and 50 per cent.
The research polled 94 financial advisers with regulatory permission to advise on pension transfers.
Half of the financial advisers polled in October by the PFS said they had to pass the increased cost of professional indemnity insurance premiums onto their clients.
PFS chief executive Keith Richards says: “The hardening of the professional indemnity insurance market is impacting the availability of advice to consumers, who must take regulated advice to be able to exercise their rights under pension freedoms for defined benefits pension transfers.
“The current method of funding consumer compensation is also unsustainable and we are again calling for government intervention for a complete overhaul before there is no alternative as both consumer protection and market sustainability continues to be negatively impacted.
“To achieve this, we must remove the volatility and uncertainty around the availability of professional indemnity insurance, the consequential impact and pressure on the Financial Services Compensation Scheme and its levy.
“This can be achieved by pooling the cost of compensation at the highest level: funds under management. This would mean a much wider, fairer, and sustainable solution for modernising the regulatory, consumer education and compensation funding structure to ensure consumers don’t lose out on access to advice, are compensated when things unexpectantly go wrong and ultimately have greater trust in our regulated sectors at a time when the public are facing uncertainty and a significant and growing risk from scams.”
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