Watchdog backs right to final salary transfers

Savers told by financial advisers that they cannot transfer their “final salary” pensions – even if they are aware of the risks – have been granted unexpected support by the City watchdog and the Treasury.

Government rules state that people must seek financial advice if they want to transfer a final salary pension, also known as a “defined benefit” pension, valued at £30,000 or more. Transfers have grown in popularity because moving money into “defined contribution” schemes (the more common pension arrangement) allows greater choice over how to make withdrawals from pots. The ability to sidestep inheritance tax is another benefit of the latter schemes.

But savers, including dozens of Telegraph Money readers, have found advisers unwilling to help them transfer if they deem it not to be in their best interests. In some cases this has left people with a bill from the adviser of several thousand pounds and yet no change to the state of their pension.

Now the City watchdog has issued new guidance for advisers confirming that they should help people who want to transfer, irrespective of advice not to do so.

The move follows another supportive paper, published in June, laying out similar guidance to advisers and suggesting that they should make it easier for savers who seek to transfer their money.

Many people are advised against the move because their final salary plans pay generous, guaranteed incomes that rise with inflation. This is difficult to value, as the ultimate benefit will depend on how long the retiree lives. As a result, advisers are extremely cautious about recommending a pension transfer.

The watchdog reiterated that “where a client has received a personal recommendation they may choose to take a different action to the one that was recommended”.

It has set out guidance for advisers to follow when helping people who want to act against their wishes, including requiring savers to state in their own words that they understand the implications of going against advice.