Trust is so important.
Trust is once again in the news as headlines about the Tata Steel pension fund allege that financial advisers have not advised scheme members in their best interests by recommending that they transfer away from their final salary pension entitlements in exchange for a cash lump sum.
This is a very sad story, and unfortunately not an isolated one. You don’t have to look far to add BHS and Carillion to the list of potentially failed final salary schemes which are now in serious trouble and could fall in to the Pension Protection Fund thereby limiting the benefits for some of its members and removing the option of pensions freedom for those that it may be appropriate.
Tata Steel employees have been stuck between a rock and a hard place recently, with a choice of two final salary scheme options; neither of which will offer the level of benefits that members were promised at outset. A third option has also been offered, that of a pension transfer out to a personal pension.
When is or isn’t it right to move out of a final salary pension scheme?
There are no hard and fast rules about when it is or isn’t right to move out of a final salary scheme but it’s fair to say that, more often than not, the correct advice is to stay in the scheme. As I have outlined in my previous blogs, there are occasions when it can be right to leave but it requires an experienced adviser with a specialised qualification working to a rigorous and well defined process in order to identify those circumstances in which a transfer away from the scheme is advisable.
Unfortunately, there are still some less than trustworthy advisers in the market, which is why you should always look for those advisers with a track record in treating their clients fairly and who can demonstrate how they work with a consistent process. It’s therefore not about the adviser who is nearest to you, cheapest, offering a free parker pen… it’s about an adviser you ‘click’ with and who you want to trust with your financial future. Your first meeting should be about no more than that; do you want to work with this adviser and do you trust them to help you decide what’s right for you?
Don’t forget either that the decision about whether to transfer out or not is just the start of the journey should you decide to move away, in which case you will now have the responsibility for guaranteeing your own pension income for life. This is when a relationship with a financial adviser you can trust really is essential.
