Ex-FSA employee warns of regulatory action on DB transfers

By Simoney Kyriakou

Several different organisations can give an indicator of the activity based on the number of transfer value analysis (TVAs) reports.

Selectapension - one of the companies that can monitor TVA activity - has reported a 66 per cent increase in defined benefit transfer cases analysed by advisers and paraplanners in 2016, compared to 2015 when the pension freedoms first came in.

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It also showed the demand for transfers rose as 2016 progressed, with a 120 per cent increase in DB cases analysed in December 2016, compared with the December 2015 figures.

Vince Smith-Hughes, retirement expert at Prudential, said: "Demand for TVAs reports has increased hugely over past few years – about 800 a month at end of 2016 compared to 100 a month prior to announcement of freedom.

"Prudential provides TVAs reports requested by advisers when they are considering a defined benefit transfer. Not all TVA requests result in a transfer, but this indicates how interest in DB transfers has increased."

But transferring is not straightforward. According to Peter Bradshaw, national accounts director of Selectapension: "With full scheme information, a TVAs report can be produced within an hour, but the whole transfer process can take months."

In 1994 the industry regulator ordered a review of sales of personal pension policies (both regular-premium and transfer policies) taken out between 29 April 1988 and 30 June 1994.

The deadline set out in the formal Pensions Review was 31 March 2000 - so it is now too late for a consumer to ask for a Pensions Review.

The review covered three areas where a problem had been identified:

"opt outs" - involving consumers who were already members of occupational pension arrangements but who decided to leave and take out a personal pension policy.
"non joiners" - involving consumers who were eligible to join occupational pension arrangements but who decided not to join and to take out a personal pension policy instead.
"transfers" - involving consumers who transferred the value of their accrued pension benefits from occupational pension schemes to personal pension arrangements.

There were complaints that the client was not advised to join a workplace scheme; in defence, the advisers commonly told the Financial Ombudsman Service:

The firm was unaware that an occupational pension arrangement was available to the consumer.
The consumer planned to leave their employer after a short time, making membership of the occupational pension arrangement of little or no value.
The sale was done on an execution only basis.

It was often found during the then Financial Services Authority's action on enforcement and redress that there was a significant lack of appropriate documentation kept and maintained by the financial advisers.

While no new reviews can be opened, as the Financial Ombudsman Service comments: "A consumer who was not included in the Pensions Review can still bring a complaint to us - and we might be able to consider it."

simoney.kyriakou@ft.com

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