The pensions and financial services firm is calling on the FSA to order that pension transfers from final salary schemes on a direct offer or execution only basis are not appropriate.
In a letter to the FSA, Hazell Carr has argued that the outcome of direct offer or execution only sales is bound to be a large number of inappropriate sales. Without FSA action, a Sipp mis-selling scandal could be in the making, it says.
Concerns over execution-only pension transfer business at the regulator have grown to such an extent that last November the FSA published a statement on practice. That statement said that while pension transfers are not prohibited via direct financial promotions, firms that go down this route must consider the regulator’s financial promotion principle to be clear, fair and not misleading.
The FSA added that any direct financial promotion pack relating to transfers will therefore need to contain all the information in the regulators detailed rules, such as comparison of benefits. Scheme members now have to be provided with a clear explanation of the yield required by the new scheme to beat the existing benefits.
Hazell Carr says this does not go far enough and wants the FSA to ban execution-only transfers altogether.
David Carr, chief executive of Hazell Carr says: “No right-minded person would seek to transfer from a final salary scheme without understanding the financial consequences of that decision. Further, there are only a small handful of investment professionals who should attempt to undertake their own transfers without advice. We therefore find it bizarre that any investor can chose to make a transfer on a direct offer basis without receiving a transfer value analysis, showing the required critical yield. The analysis is probably the one item of information that will have the greatest impact on investors.”
An alternative is that pension providers should refuse to take a transfer unless the investor has received advice.”