Financial advisers that want to continue to give people pension transfer advice over their final salary pensions or other types of Defined Benefit pensions may have to pay more to professional indemnity insurers due to a growing mis-selling scandal.
After studying the advice of around 13 companies who gave advice about transferring final salary pensions, the financial services watchdog – The FCA – found that less than 50% was clearly suitable. With thousands of people taking advice to transfer their final salary pensions each year, it could be that many have been mis-sold, and may be worse off in retirement because of it.
Professional Indemnity insurance protects a business (and it’s clients) from negligence by the business.
For instance, if a company gives somebody negligent pension advice, and that individual loses money because of it, then they might make a complaint to that adviser – “You sold me the wrong thing and now I’ve lost money!”
If that complaint is a valid one (which it often is), then the company may claim against it’s professional indemnity insurance to pay the claim.
But because of the huge number mis-sold final salary pension transfer claims, PI insurers have become increasingly concerned when covering advisers who have permission to transfer Defined Benefit Pensions.
Why is transferring a final salary pension a bad idea?
It’s rarely the right decision for an individual to transfer a valuable final salary pension, as the benefits they feature are often irreplaceable, such as a guaranteed income in retirement – one that keeps pace with inflation.
To find out if your pension transfer was mis-sold to you, head over to our dedicated page on pension mis-selling.