On the go: Some 35 per cent of pension schemes have either appointed or are considering appointing an independent financial adviser to support members, research reveals.
According to XPS Pensions, some 10 per cent of its pension scheme clients have appointed an IFA and 25 per cent are actively considering appointing one.
The report, a follow-up on recommendations it made in its Member Outcomes survey earlier in the year, suggests the impact of pension freedom reforms is still being felt within the industry, as it shows an increasing number of defined benefit schemes looking to provide more support to help members make carefully considered decisions.
Historically, DB transfers were fairly uncommon, but following the introduction of freedom and choice in 2015 more options are available to members, resulting in more duties placed on trustees – and trustees and sponsors have a legal duty to ensure members are adequately supported.
The increased level of knowledge and access to professional advice means that trustees and sponsors are in a much better position than their scheme members to select an IFA
Simon Reddish, XPS Pensions Group
Schemes that do not appoint an IFA could be leaving members exposed to receiving poor advice, which could lead to the wrong decision or falling victim to a scam, warned the consultancy.
Simon Reddish, senior consultant at XPS Pensions Group, said: “Freedom and choice has been a game-changer for the pensions industry.
“We are seeing a growing number of trustees and sponsors looking to provide more support to help their members make the right decisions for their retirement.
“The increased level of knowledge and access to professional advice means that trustees and sponsors are in a much better position than their scheme members to select an IFA, and I think doing this can meaningfully improve member outcomes and protect schemes.”
What to look for in an IFA
To ensure members receive the most appropriate advice, the pensions consultancy recommended that DB schemes look for advisers who are truly independent and have no commission or other incentives to promote specific products.
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Also, they should not use contingent charging structures and must provide good options for members – for example, there should be the option of a low-cost, simple receiving arrangement that is not high in investment or advice fees, and they should provide the option for ongoing advice.
Finally, schemes should look for IFAs who can engage and communicate well with the scheme’s members and who have the Pension Transfer Specialist accreditation.
