Undue blame is being heaped on the advice sector during the BSPS saga, Personal Finance Society (PFS) chief executive Keith Richards has said, which could have wider implications for the defined benefit (DB) market.
In response to the report by the Work and Pensions Select Committee last week, which suggested contingent charging should be banned and described advisers as “vultures”, Richards said a more balanced and objective review was required to ensure the public are not poorly served by “reckless statements”.
“Regrettably, due to the spurious actions of a few unregulated introducer firms, we are now seeing the blame and responsibility being disproportionately placed upon the advice sector – which is not in the public’s best interest,” he said.
“Sadly, all British Steel Pensions Scheme (BSPS) transfers will now come under scrutiny and genuine advisers will also fall under suspicion of doing the wrong thing. As a result, there is a growing risk of wider implications for any DB transfer.”
In late September, 124,000 BSPS members were given the choice of staying in the scheme, and thereby ending up in the Pension Protection Fund, or transferring to the proposed new ‘BSPS2’ scheme, or transferring out altogether.
According to the Financial Conduct Authority, some 583 steelworkers were given unsuitable pension transfer advice. The financial watchdog has said it will collect data from all advice firms with DB transfer permissions throughout this year.
Eight advice firm have agreed to cease defined benefit transfer business as a result of their work on steelworker’s transfers.
‘Judge, jury and executioner’
Richards continued: “Poor practice and over-commercial activity will always be unacceptable and there is no defence for any firm that has compromised professional standards because they saw the pension reforms as a quick money-making opportunity – but spare a thought for the majority of genuine advisers who are being unfairly implicated in this mess and who themselves may now become victims of the fiasco.”
The PFS chief argued a greater degree of responsibility sat with the scheme trustees, the employers and the Pensions Regulator, “who appear to have mismanaged the matter from the outset”.
Pulling no punches, Richards said it was “all very well to be wise with hindsight”, but foresight and the need for planning and support should have been “blindingly obvious”.
The requirement for professional advice above a £30,000 value transfer put both workers and advisers in an untenable position, he said, and the government must shoulder a share of the responsibility for introducing pension freedoms – including DB schemes – “without consulting the market, its regulators, or indeed anyone”.
“It is relatively easy for the Work and Pensions Select Committee to apportion blame after the event – but where were they when it came to having a bit of foresight to help mitigate these inevitable unintended consequences?” he added. “They seem hastily intent on becoming judge, jury and executioner now this has happened.”
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