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The impending pensions freedom regime is going to throw up plenty of opportunities for new business. But I’m not sure they will all be particularly welcome.
How about this loophole. As I understand it, the rules as they stand require anyone taking a transfer from a DB or DC pension scheme to prove to the trustees or provider that they have taken advice.
Any transfers below £30k will be exempt from this rule, but I understand that many trustees and providers will still require proof that advice has been taken.
How many advisers reading this want to give advice to someone to transfer out of a DB scheme? To someone who will not become a long term client. To give up guaranteed benefits in order to take the money out, pay the tax, and maybe buy a residential property. Anyone? Thought not.
So, we have a situation where people want to transfer, they are told they are not allowed to unless they take advice, but advisers are not interested in providing such advice (may even be told not to by their PI insurers).
But here’s the rub.
The rules say you have to prove you have taken advice. They do NOT require that you say what the advice was.
So how about this for a business model. We set up a new arm of Ovation. Perhaps it’s called ‘Ovation Pension Advice Service’. We charge a flat £1,000 fee for any client who requires pension transfer advice. We have a pro forma letter which requires the basic know your customer information, which concludes ON EVERY OCCASION as follows:
“You have asked us to advise you on the transfer of your XYZ pension. You do not require advice on any other area. You have only given us information relating to the XYZ pension and our advice is therefore restricted to this pension. Our conclusion is that you should NOT transfer out of the XYZ pension scheme as the benefits and tax position of the existing arrangement will mean that you are financially better off in retirement.”
Client can now sign the trustee or provider’s form that seeks confirmation they’ve taken advice and happily take their money out. No ongoing liability for the adviser as the advice was not to transfer. I reckon we could bang out 10 of them a day per adviser minimum, at a grand a time. Ker-ching.
Needless to say, we won’t be setting up an OPAS type business. But there are plenty of people who are.
So, when a couple of elections have come and gone and George Osborne is working in the City, and I get telephone sales calls at home from a robot offering me no win no fee for making a pension switching claim, who will be the ones to pick up the bill?
To summarise by way of a note for the attention of any journalists reading this – please stop saying that these pension freedom reforms are welcomed by the industry. They are not welcomed by me.