Moved your workplace pension in the last 10 years? Has poor or faulty advice, big charges and plunging stock markets left you staring at huge losses?
We are always constantly amazed by the number of people who have transferred away from defined benefit workplace pensions (DB schemes) and are absolutely convinced that the advice to move was bulletproof and in their best interests.
Clearly they’ve not noticed the telltale signs – their advisers’ collection of new cars or the fact they’ve moved to a huge new house. How much did you pay for their initial advice to move your pension, not to mention their ongoing charges?
Do you know that these ongoing fees are THEIR pension scheme ??
Let’s look at an adviser firm with £100 million of assets under management. Not that hard given the huge six or seven-figure transfer values we regularly see. At just 0.50% charged for ongoing advice, that equates to a tidy £500,000 per year. Nice enough in itself, BUT not where the big money can be earned – did you know IFA firms can typically sell their book for 3.5 times the multiple of their annual advice fees? In this case an astonishing £1.75 million. Hopefully, these huge rewards haven’t affected your pension. Sadly from what we see in many cases, it unfortunately and absolutely has.
The FCA has been concerned about the DB transfer market for years. Unfortunately with Covid-19, the outcome of their review won’t start to become apparent until the end of the second quarter next year. Remember they are consulting on –
- Limiting initial advice fees to £3,500. We know of people who have paid SUBSTANTIALLY more.
- Stopping contingent charging. At the moment your IFA only gets paid if you move. Perhaps not the best.
So with all of this as a background, you might be surprised to know that the number of advisers offering DB transfer advice has halved in the last year alone – dropping to just 4 in 10.
An industry report issued on 13 May 2020 backed this up. Only 41% were still giving DB transfer advice with 15% expecting their volume of cases to reduce significantly. Smaller IFA firms with less than £50 million of funds under management were much less likely to offer DB transfer advice.
So why is the question? Well, there are a number of reasons:
- A substantial increase in the cost of PI (Professional Indemnity Insurance) premiums for DB transfer advice. As much as a staggering 900% in some cases.
- PI insurers taking a much harder view. Especially on business introduced from third parties. For example in the case of Capital & Income Solutions and Mike Connelly at the Mortgage Finance Store in Dundee
- PI Insurers refusing to offer cover on transfers before age 55, or where the cash-free element is being used to clear debt.
- The substantial increase in the Financial Ombudsman Scheme’s compensation limit – now a massive £350k.
- Increased activity from Claims Management Companies like Beat the Banks, who with years of industry experience, know the rules and how they should have been applied.
- And lastly the regulator. The FCA’s research makes horrific reading. Billions moved out of these “gold bars” schemes since April. Figures collected to 31 October 2018 showed over 75% of the advice given to transfer away, was in some way faulty.
If you’ve moved your defined benefit workplace pension in the last 10 years, then Beat the Banks can tell you if the advice was sound AND if it wasn’t, how to recover your tax-free compensation. To find out more call – 01382 200474, or complete our enquiry form and we’ll be in touch.