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.

Hands holding a pen and blank contract
Advisers were recommending transfers simply to get paid
(Image credit: © Getty Images/iStockphoto)

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.

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David Prosser
Business Columnist

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.