Articles - The Pension Transfer Gold Standard

The Personal Finance Society (PFS) has seen more than 600 advice firms sign up to its Pension Transfer Gold Standard (PTGS) since it was announced in April, of which we are one. While this affords great satisfaction to each of the advice firms whose application has been accepted, the important point is what it offers to our clients.

 By Fiona Tait, Technical Director, Intelligent Pensions

 The PTGS is not just another set of regulations, albeit industry-led. This would simply have added yet another layer to an already complicated regulatory landscape and would also have required industry-wide monitoring and enforcement. We already have the FCA to do that and we have seen several instances of that in the last year or two.

 What the PTGS is looking to achieve is education and reassurance for the clients of financial advisers. The fact that in order to comply, advisers who sign up will be reviewing and making improvements to their business processes, is a very welcome plus.

 So what does this mean?
 One of the key issues highlighted by the British Steel Pension’s “right to choose” exercise was that members had great difficulty finding the advice they needed when considering transferring their pension benefits. Local advisers became overwhelmed with enquiries and members simply did not know where to start looking for an alternative. As a result, they became an easy target for the unscrupulous practices adopted by some of the advisers who proactively contacted them.

 The PTGS would not have prevented those advisers from following advice processes which led to some unsuitable outcomes, but it might have been a source of information to give the British Steel Pension workers a better chance of spotting what a good transfer advice process should look like and allowing them to contrast this with the service they were in fact receiving.

 This will only work if the standards are widely communicated by the PFS and the advisers who adopt it, and if they are easily understood by the members affected. Trustees can help with the former by including it within information sent to members who request a transfer, or by organising a bespoke service with an advice firm which has already adopted the standard. The PTGS provides trustees with an extra layer of due diligence and provides additional support to the selection of a particular adviser.

 Firms who have adopted the standard can then help the trustees to outline the service members should expect if they ask for pension transfer advice and encourage them to report any instances where they believe the adviser has fallen short. Above all, if the member is worried that their adviser is not adhering to the standards they should not go ahead with transfer. It is important they find an adviser they are happy with.

 What should members expect?
 The PTGS requires adherence to 9 simple principles, which address the issues of consumer understanding, adviser qualifications and the cost of advice. These can be found in the Gold Standard Consumer Guide, or in more detail on the PFS website and most should already be standard practice for quality adviser practices.

 PTGS advisers must first help clients to understand what the advice process will involve before they agree to go ahead. A key element of this is a definite statement that a transfer will not be recommended unless the adviser believes the member would better off than they are within the scheme.

 The PTGS, unsurprisingly, requires that advisers should be suitably qualified. The qualifications in themselves may not mean much to the member but recognition by a professional body does provide an element of reassurance, much like the standards promoted in other professions.

 Charges for the advice services are of course also central to the PTGS. It does not try to mandate the level of fees but insists that they are clearly disclosed. This may not sound much different to the existing regulatory requirements, but a key difference is that the client should be asked to specifically indicate that they have understood this element of the service. Advisers are expected to provide a stand-alone summary of their charges and ask the client to sign and date it to signify acceptance.

 So what?
 At the end of the day, advisers who adopt the standards are expected to provide evidence to support their adherence to the principles of the PTGS but they will not be proactively policed. It falls therefore to all of us to help employers, trustees and most importantly members to set their expectations and empower them to walk away if they are not met.

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