What is the Gold Standard
Defined benefit transfer is strongly regulated by the Financial Conduct Authority, subsequently financial advisers who are authorised to provide advice have to adhere to a strict set of rules and guides. The Gold Standard is a code of good practice based around a set of principles to safeguard pension transfer advice.
How do financial advisers obtain the Gold Standard?
Eligible financial firms can adopt the Gold Standard regardless of the accredited body they are a member of, there is a defined criteria that these firms need to meet.
The Personal Finance Society (PFS)
A representative industry body called the Pensions Advice Taskforce was setup by the PFS to ensure the voluntary code of good conduct. The PFS’s primary role is to promote ethical behaviour, high standards of professionalism for both technical knowledge and client service. The Chartered Insurance Institute is the globe’s largest professional body focused on the confidence of the public into both insurance and personal finance; the PFS is part of this institute.
What does the Gold Standard do that the FCA doesn’t
The two founding core principles that apply to pension transfer and pension advice are:
A firm must pay due regard to the interests of its customers and treat them fairly.
A firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading.
The FCA strongly advise that prior to any advice given, the financial adviser is to form the assumption that a transfer will be unsuitable. The assumption is based on the value of guaranteed benefits being more positive if clients leaving the funds where they are.
Firms that adopt the Pension Transfer Gold Standard have to exceed the FCA requirements when dealing with clients.
Financial advisers must help clients to clearly understand the implications of a transfer. This enables the client to determine if advice is appropriate before it is taken and before any kind of cost is incurred.
The financial firm has to utilise an array of appropriately qualified technical skills. The analysis of information is used to determine advice on whether to transfer, what are funds to be transferred into so that clients have the optimum chance of meeting their objectives.
All advice has to support the overall wellbeing of the client in relation to their needs, wants and objectives.
Advisers can only recommend mainstream investments from fully regulated investment companies (unless they are rated as expert investors).
The firm has to be entirely transparent in both process and costs to ensure clients have clear, unambiguous understanding.
Any conflicts of interest must be highlighted. This relates to pension transfer advice and how these can be managed for the client in their best interests.
Advisers should be open with you concerning their experience with advising people on transfers, citing outcomes in support.
Does the Government have any view on individuals transferring their pension?
In short yes. The UK Government has made it a legal requirement for individuals to seek financial advice prior to authorising any pension transfer. If a person has was it known as ‘safeguarded benefits’ and especially for those in a defined pension benefit scheme or a guaranteed annuity, advice from a regulated, proven source must be taken. Those with benefits worth £30,000 or more also fall under this regulation.
Transferring pensions is complicated and has to be encompassed with professional financial advice; only with this criteria can customers make fully informed decisions that suit their best interests.
Why do people have to abide by this rule?
The rule in in place for the protection of the public. The purpose of the Pension Transfer Gold Standard is designed to help people recognise and locate financial advisers that adhere to the prescribed professional standards that go above and beyond the core FCA principles.
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