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Topics: positive solutions| pension transfers| Aegon UK
National IFA Positive Solutions has overhauled its pension switching guidelines for its 1,300 partner advisers following FSA guidance and recent regulatory action against at least 22 firms.
New limits for transfers have been set at 1% per annum for each complete year remaining until the client's intended retirement date. This kicks in after five years, before which a 5% shortfall limit is allowed.
It is subject to a maximum shortfall of 20% for clients with 20 or more years remaining to normal retirement date (NRD).
Previously, shortfall limits at the Aegon-owned business were banded in five year periods.
The company says it undertook the review, which includes projections for switches into insured funds and collectives for SIPPs, following industry-wide FSA guidance and partner feedback.
The regulator issued guidance following a review of firms' pension switching advice in 2008.
Visiting 30 firms and assessing more than 500 files, the regulator said it found unsuitable advice in 16% of cases. In total, a quarter of the firms in its sample provided unsuitable advice in 33% or more of cases.
Last year, RSM Tenon was fined £700,000 and ordered to conduct a past business review partly due to its pension transfer recommendations.
Ten other firms are also being required to conduct past business reviews, while a further 11 firms have been told they must review those files assessed as unsuitable or unclear and pay redress as appropriate.
Positive Solutions says partners must always be able to argue a "strong rationale" for any pension switch, particularly when a shortfall is projected.
But it says there will always be cases when a client is best-served by switching pensions even if a shortfall is forecast.
For example, it says there is potential for improved performance in moving from old contracts that can't meet a client's needs due to restricted fund choice or closed funds, to modern contracts with more investment options.
"Positive Solutions believes this [change] will not result in any relaxation in controls but will make the procedures more appropriate for clients and easier for Partners to understand and operate," a spokesperson said.
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Direct sales mentality
Is it 'advice' or is it 'churning', whether it is for commission or fees this will carry on post RDR. We all know who the firms are don't we!
Posted by: Exasperated Me
really
is this right? stupid article
Posted by: neil
Confusion says:
This world clearly runs on assumption and miss-understanding: The investors assume they receive honest, beneficial and worthwhile advice and guidance. When all goes 'pear shaped' the investors complain that they miss-understood the ramifications of the actions they authorised a representative to complete. Quotations, letters of explanation; key features; product descriptions/policy documents; cooling off periods and small print is provided. A client signature qualifies the request to proceed. What is missing? Client Common sense; Responsibility for own actions; Questions about unclear matters; Time spent understanding the reason why and potential losses against potential benefits. Finally on any transfers: : Neither Agent nor Client has adequate control over the activities of Fund Managers, Banks, Building Societies, Governments and World market fluctuations. Who is to blame? It's a nonsense to assume that in circumstances other than where ancient restriction and/or perhaps higher charging structures may scupper opportunity, that a transfer, even with a 20% fund bonus (AMP circa 1999), would be more beneficial than moving amongst funds within the originally selected investment vehicle. Vote: “Caveat Emptor” not “Compensation Culture” before we bankrupt the world.
Posted by: Graeme C. Halloway
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Is this correct?
Why is PosSol still working with 'shortfall' rather than the FSA preferred RIY? The maths seems to work out that a 20% shortfall after 20 years is equivalent to an extra 1.2 of RIY. In both cases that is a massive extra cost - how can any plan (with equivalent risk level of funds) be worth that much extra. This is more than twice the limit being used elsewhere in the industry (also following 'FSA guidance'). Time for some consistency across the industry?
Posted by: Stan