Your pension adviser could be picking up a fee from a financial firm while purporting to give you independent financial advice, warns a former pension minister.
Liberal Steve Webb was pension minister in the former Conservative\Lib-Dem coalition government and has revealed some of the sneaky tricks in the world of pensions.
He was giving evidence to a group of MPS sitting as the Works and Pensions Select Committee taking evidence on how the financial advice market is working after a rule shake-up during the last government.
Webb is urging the government to order advisers to make any financial ties that they may have with providers clear to customers to avoid conflicts of interest.
The consultation is looking at claims that compulsory pension advice for retirement savers is too expensive and stopping them from exercising pension freedoms introduced in April 2015.
Double advice risk
Webb told the MPs that he has doubts that the advice many retirement savers are given is really independent as financial advisers have business deals through networks with pension firms that pay them upfront fees.
He argued that retirement savers face two pension advice risks:
- Finding out that their recommended pension solution is not the best deal they could have taken
The concerns are supported by research in the USA published by The Whitehouse, where a survey found that retirement savers who bought a pension with the advice of a tied adviser ran out of cash an average five years before someone with an unbiased independent adviser.
IFAs are not always unbiased
The report concluded the cause was higher fees and poorly performing investments.
Webb, who works for insurance firm Royal London, said: “A lot of advisers say they are independent, but this is not necessarily the case.
“An unbiased professional is supposed to consider products across the whole of the market when making a recommendation. Many are limited to where they can look by network agreements which could exclude better deals for their clients.”
Webb told the committee that IFAs should tell customers that they have these links which may influence their buying decisions and ultimately how much income they have in retirement.
