The scandal brewing in pension transfers
Many savers who switched their retirement fund out of final-salary pension schemes received poor advice. But those caught out have limited recourse to redress.


Thousands of savers who gave up valuable final-salary pension benefits did so after consulting financial advisers who knew they would only get paid if they recommended a pension transfer, new data from the Financial Conduct Authority (FCA), the City regulator, reveals. The figures will increase the pressure on the FCA to explain why it took so long to outlaw a controversial charging model despite warnings it was fuelling the mis-selling of pension transfers.
In October, the FCA announced advisers would no longer be allowed to charge contingent fees when giving advice on transfers. Such fees are only payable if the saver ultimately decides to transfer their pension savings, prompting concerns that many advisers were recommending such transfers simply to get paid – despite a widespread consensus that giving up final-salary occupational pensions scheme benefits, which are guaranteed, does not make sense for the vast majority of people.
Over the 18 months to March 2020, around 39,400 savers were advised to leave a final-salary pension by an adviser working on a contingent fee basis. The regulator has not said how many of them followed their advisers’ recommendations, though around 100,000 savers transferred out of a final-salary scheme over the two years to March 2020.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Nowhere to turn
Those caught out by the scandal have limited recourse to redress. Reversing the transfer is unlikely to be possible, leaving savers with no alternative but to pursue their advisers for compensation, either directly or through the Financial Ombudsman Service. However, there is some concern about advisers who have since gone out of business, especially since the regulator’s data shows some were not properly insured. That would leave savers with nowhere to turn.
For its part, the FCA consistently refused to ban contingent fees in 2018 and 2019 because it said there was insufficient evidence that the practice was leading to poor advice. The regulator has always been concerned that many savers are uncomfortable with the idea of paying for advice upfront, particularly if that advice turns out to be that they are better off doing nothing.
In the end, however, the FCA felt compelled to act against contingent charging, given its prevalence and the large numbers of people giving up final-salary pension benefits despite repeated warnings they were likely to be worse off as a result. The regulator conceded the practice meant advisers had a clear conflict of interest.

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.
-
SIPP holders to get cash warnings and be offered default funds
News Providers will be required to offer investors a default fund and must warn customers of the inflationary risk of cash savings the regulator has said. What the new rules mean for your retirement pot?
By Marc Shoffman Published
-
Zoopla: Asking price discounts hit a five-year high – is now the time to buy a property?
News Zoopla’s October House Price Index shows sellers are accepting discounts of 5.5% on average to secure a sale – we reveal where homeowners are taking the biggest asking price cuts
By Marc Shoffman Published
-
How to cut the cost of home insurance
Home insurance policies are becoming increasingly expensive, but there are several ways you can keep costs down.
By Ruth Jackson-Kirby Published
-
Are lifestyle funds still fit for purpose?
Lifestyle funds have failed to do what they were supposed to do – shield savers from risk in the run-up to retirement.
By David Prosser Published
-
NatWest-owned Ulster bank boosts easy access savings rate to 5.2%
Rates on easy access savings accounts have hit over 5%, with Ulster Bank now giving savers the chance to earn 5.2% on their cash savings. We have all the details.
By Marc Shoffman Published
-
Moneybox raises market-leading cash ISA to 5%
Savings and investing app MoneyBox has boosted the rate on its cash ISA again, hiking it from 4.75% to 5% making it one of top rates. We have all the details.
By Ruth Emery Published
-
October NS&I Premium Bonds winners - check now to see what you won
NS&I Premium Bonds holders can check now to see if they have won a prize this month. We explain how to check your premium bonds
By Kalpana Fitzpatrick Published
-
October’s NS&I Premium Bond winners revealed - have you scooped £1 million?
Two lucky NS&I Premium Bond winners are now millionaires this October. Find out here you are one of them
By Kalpana Fitzpatrick Published
-
The best packaged bank accounts
Advice Packaged bank accounts can offer great value with useful additional perks – but get it wrong and you could be out of pocket
By Tom Higgins Published
-
Energy bills to fall 7% under new price cap
Energy bills could fall by an average 7% from October under the new Energy Price cap announced today. We explain what the new cap mean for you and when it will come into play
By Pedro Gonçalves Published