Trustees are using pension schemes’ funds to pay for independent financial advice for their members, it has emerged.
Speaking at the Annual Member Nominated Trustee Spring Conference on Wednesday, 28 February 2018, LCP partner, Bart Huby said the practice is already happening as some schemes look to ensure its members were getting trusted advice.
Trustees have been increasingly concerned about the advice been given by Independent Financial Advisers (IFAs) on defined benefit transfers and pension freedoms, which has pushed some pension funds to take matters into their own hands.
LCP client development director, Lorraine Porter, said: “I’ve seen selection processes take place where schemes have given two options to its members at pre-negotiated institution rates, rather that retail rates so there is no financial detriments to the member.
“They undertook a huge exercise to panel interview actuaries, investment consultants, IFAs and firms that they felt were appropriate for their members.
“It did cost a bit and took quite a bit of time but the members had confidence in the solution. I think that’s where we are aiming to get … to give your members confidence in the solution.”
LCP said there were a number of “reputable” consultancy firms who had specialised teams of IFAs which schemes could use to deliver trusted advice.
In some cases, the pension scheme would pay for advice for its members with numerous pension pots, but the member would only receive advice on which would benefit the scheme.
Huby added: “The IFA has to take into account the full financial circumstance of the member, but you [the pension scheme] would only pay them to provide specific advice on your schemes' benefit.
“If they have 20 pension schemes you [the pension scheme] are not going to pay for them to provide advice on 20 arrangements. If they want to pay extra to get more holistic advise on all their arrangements that would normally be the members cost.”
“It’s not straight forward but I think it is something trustees are increasingly thinking about.”
In the Financial Guidance and Claims Bill, published in September last year, the government confirmed the introduction of the pensions advice allowance, permitting pension scheme members to access £500 from their pension pot tax-free up to three times before they reach age 55 to pay for regulated financial advice.
In January, the government removed an amendment to the Bill which would have seen members automatically enrolled into guidance if they chose to take benefits under pension freedoms or DB transfers.
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