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The Personal Finance Society, the professional body for independent financial advisers, said many of its 37,000 members are finding it difficult to secure the insurance needed to offer pension transfer advice.
This comes as the Financial Conduct Authority, the UK financial regulator, steps up a probe into poor transfer advice, amid concerns about a new pension mis-selling scandal.
Reforms introduced by George Osborne, the former chancellor, in 2015 made it more attractive for people to transfer cash out of generous defined benefit pension schemes run by companies that guaranteed an income in retirement.
Under the changes dubbed the “pension freedoms”, people can shift their money into personal pensions that are riskier because they rely on the performance of stock markets.
Currently, individuals looking to transfer a defined benefit pension worth more than £30,000 are required to obtain independent financial advice, and these professionals must have insurance to protect against customer complaints about poor advice.
But Keith Richards, chief executive of the Personal Finance Society, said professional indemnity insurers had begun to pull back from providing cover for financial advisers involved in pension transfer advice.
“The pension freedoms are in great danger of being de-railed if [professional indemnity] insurers continue to overreact and withdraw cover for regulated advisers and their clients,” he added.
Mr Richards said Mr Osborne’s reforms had increased the appeal of transferring money out of a defined benefit pension for those who wanted greater control over how and when they take their cash. Since 2015, more than 200,000 transfers have taken place.
Full article on Financial Times (subscription required)