Over 30 firms stop offering DB transfer advice

Over 30 financial advice firms have stopped offering pension transfer advice in just three months, due to issues obtaining affordable professional indemnity cover, the Personal Finance Society (PFS) has revealed.

The Pensions Transfer Gold Standard, launched in April 2019, had more than 1,255 advisers signed up to the voluntary code by the end of the year.

However, the last 90 days of 2019 saw more than 30 firms pull out, with those de-registering stating that they were no longer offering pension transfer advice at all due to restricted access to professional indemnity insurance at an affordable level.

Following the decline, the PFS has re-engaged with HM Treasury and Financial Conduct Authority (FCA) over the need for a review of professional indemnity insurance.

The group has also called on members to report poor practice at claims management companies, for the PFS to then share with the FCA.

Despite the decline in firms offering pension transfer advice, the latest XPS Transfer Activity Index recorded an increase in the number of transfers completed in December, to an annual equivalent of 0.91 per cent of eligible members.

The FCA is expected to publish the final pension transfer advice rules in Q1 this year, with industry experts concerned that this could see more firms ending their pension transfer advice offering.

Personal Finance chief executive and Pensions Advice Taskforce chair, Keith Richards, said: “We expect the regulator’s new rules to further impact the availability for advice on defined benefit pensions in part due to the rule changes, but mainly because of the severe hardening of the professional indemnity insurance market making it hard for advisers to get cover.

“The Gold Standard was designed as a consumer guide and while we are delighted to see so many firms align and promote the principles, weekly reports from members regarding the cost or restrictions of available professional indemnity insurance means a growing proportion of the public are being denied the right of pension freedom and choice.”

Aegon expressed similar concerns earlier this year, stating that the new regulations could risk “dramatically reducing” the supply of advice for DB members.

Furthermore, research by Royal London and Eversheds Sutherland found that there are no ‘risk-free’ responses when it comes to transferring a member’s benefits out of a defined benefit pension scheme.

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