I would like to draw attention to the catch-22 situation pensions advisers find themselves in as a result of the The FSA's u-turn on plans to scrap RU64. There's already been much debate around the appropriateness of the high levels of pension transfer business going through, and whether or not this is being led by advisers or providers themselves, and now advisers are going to be left high and dry.
While the FSA's Financial Risk Outlook for 2007 questions the role of providers in ensuring pension transfers are suitable and in an investor's best interests, by retaining RU64 it is ultimately advisers who will pay the price for any transfer mistakes. The FSA's January communication stated that while many of these transfers are no doubt in the best interests of consumers who require more flexible pension arrangements, the suitability of the product and the motivation for many of the transfers remains unclear. Insurers should consider to what extent their remuneration systems and information provided to intermediaries may be driving potentially unsuitable transfers.
Now with the reversal of plans to scrap RU64, advisers are placed in the precarious position of following providers' guidance on SIPP transfer activity while ultimately being the only party accountable to the FSA should anything with the client's transfer be deemed improper - advisers alone will be expected to bear the cost of providing financial redress to clients as a consequence of any misinformation from providers. How can this be good for the pensions industry?
With all SIPPs now falling under regulation as of 06 April, it's more important than ever for firms offering a whole of market advisory service to understand the different types of SIPP available, and the options that only certain SIPPs can provide.
Ramifications for advice firms
Calling for new advisers to join
Falls to 2.4%
Spent three years in the role
One of many options being 'kicked around'