Pension savers switching from defined benefit schemes to defined contribution schemes on a non-advised basis could be the “next mis-selling scandal”, Legal & General head of DC Client Solutions Simon Chinnery has warned.

Speaking at a Pensions Management Institute seminar in London, 29 November, Chinnery suggested that a lack of advice on switching schemes could cause a number of pension savers to lose out.

Noting the advice gap within the industry, Chinnery also highlighted the risk that the advice being given is not up to industry standard.

“The FCA are rightly concerned about a lot of money going out on a non-advised basis. There have been 220,000 DB transfers since 2015 and roughly 120,000 in 2017, and so far the money I have heard being transferred out is £50bn. so maybe it is the next miss-selling scandal,” Chinnery said.

“I have certainly heard stories of Independent Financial Advisors (IFAs) circling around companies and giving discounts, saying ‘give us your money and we will provide you with a SIPP’, and I think that is potentially going to be a mess.”

Earlier this month, Momentum Pensions research revealed that almost half, 47 per cent, of advisers have seen a rise in insistent clients disagreeing with their defined benefit transfer recommendations.

The Financial Conduct Authority recently highlighted that half of the DB transfer cases it had reviewed were rated as suitable. Momentum speculated that the FCA focus on transfers means that ‘one size fits all’ methods are no longer effective.

Momentum Pensions head of sales John McCreadie said: “There is clearly strong demand for DB transfers…It is a real issue for advisers faced by clients who are insistent on moving to benefit from relatively high transfer values and the perceived increased flexibility of SIPPs and DC schemes.

“DB schemes pensions offer valuable benefits and anyone transferring should be looking for choice and value from their investment selection as well as full flexibility and a range of ways of accessing the solution.”

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