Fined IFA admits to two years without pension switching reports

An IFA firm fined more than £20,000 by the FSA for poor pensions advice admits it failed to produce a single compliance report on pension switching in two years.

N-Hanced says, between 6 April 2006 and 6 April 2008, the business wrote no specific compliance reports for pension switching advice.

Advisers are required to produce written justification for their decision to switch a client from one pension plan to another.

The failing was one of several the FSA found in its investigation of the Gateshead-based IFA, which the regulator says "exposed their customers to the risk of receiving poor advice about switching their pension".

David Cummins, partner at annuity specialist Burrows and Cummins, says the two-year absence of compliance reports represents a breach in the "massive duty of care" advisers have to clients.

"Advisers must make sure they don't just lead clients by the nose to switch pensions willy-nilly from one plan to another, perhaps at the expense of exit and entry fees as well as loss of benefits.

"You should have significant justification on file to support your decisions."

N-Hanced has been fined £21,000 by the regulator for "serious" failings in its pension switching advice.

In the same two year period, the firm also admits having no formal procedures in place for recording and reviewing management information.

Compliance meetings were held "on an ad hoc basis" and were not recorded, the FSA investigation found.

In another failing, the firm says it did not undertake any trend analysis for its pension switching cases between 6 April 2006 and 6 April 2008.

This meant the firm was unable to identify any issues which arose from pension switching, and so ran the added risk of being unable to prevent future problems.

Overall, the FSA found unsuitable advice in 16% of the cases it reviewed at the firm.

However, the regulator says despite the firm's problems, it is not aware any consumer has suffered a loss as a result of the breaches.

Following the FSA's investigation, N-Hanced undertook a review of its pension switching advice using the regulator's pensions switching template, and has since rectified the issues raised.

N-Hanced is the fourth advice firm to face a fine for pension switch failings following the regulator's thematic review of the area.

It has previously taken action taken against RSM Tenon, Charles Palmer and Robin Bradford.