MPs on the Select Committee today publicly urged the FCA to include a ban on contingent charging for pension transfer advice following the BSPS pension transfer fiasco. Contingent charging, when fees are only charged when a transfer goes ahead, has split the financial adviser community although many have expressed support for a review of contingent charging.
Kay Ingram, director of Public Policy at LEBC, said the company wanted to see contingent charging outlawed.
She said: “We agree that contingent charging should be banned. It is not a practice which LEBC employs, as we believe it is important to maintain a neutral approach when advising on pension transfers. We charge a fixed fee for advice, regardless of the outcome of that advice. Those who charge contingent fees will inevitably have a bias towards recommending a transfer.
“For many defined benefit pension scheme members, staying in the scheme for the majority of their working life and retaining the promise of a guaranteed retirement income is the right thing to do. It is only when retirement is near term and there are special personal circumstances that may make a transfer beneficial to the member or their family, that individuals should consider whether a transfer will be in their interests,” she said.
“We understand the argument used by some, who charge contingent fees, that not everyone has the funds available to pay for advice out of their own pocket. We do not agree that this justifies contingent charging.”
LEBC says the ‘answer’ to making advice affordable is to:
• Provide guidance via workplace education which enables scheme members to understand their options before seeking individual advice
• Encourage employers to make employer-sponsored advice available to staff - tax free up to £500 per person per year.
• Use the pension advice allowance to pay for advice. (£500 up to 3 times per lifetime paid from the pension fund).
• Cut the cost of advice delivery by adopting a combination of technology and human interaction - so-called “bionic advice.” LEBC believes this will cut the cost by around a third.