What is the Pension Gold Standard?
The Pension Gold Standard is a voluntary code of good conduct for financial advisors. It was set up by the Pensions Advice Taskforce* to make sure people receive ethical and professional advice for Final Salary Pension Transfers.
Whilst it is a regulatory requirement that all financial advisors pay due regard to the interests of their clients, and treat them fairly, The Gold Standard defines 9 core principles that a financial advisor must stick to.
What this means is that The Gold Standard enables you to find an advisor with your best interests at heart, who operates in an ethical and professional way, above and beyond what is usually expected from them, when assessing your pension transfer options.
The Pension Transfer Gold Standard Consumer Guide
The Pension Transfer Gold Standard Consumer Guide helps you understand what to look for when choosing a financial advisor.
It helps you recognise good practice and ethical and professional standards when choosing a pension transfer specialist.
It outlines 9 core principles that Gold Standard financial advisors adhere to.
The 9 Pension Transfer Gold Standard Principles
Help clients understand when advice is appropriate.
Ensure advice given supports the clients overall financial wellbeing in the context of their stated objectives.
Ensure client understanding and acceptance of all charges.
Ensure the most appropriate and updated technical skills are applied.
Transparent management of Conflicts of Interest.
- Help clients understand the cost of transferring benefits.
Avoid unregulated investments and introducers.
Transparency in advice processes and outcomes.
Promote the Consumer Guide to the Pension Transfer Gold Standard.
The 9 Pension Gold Standard Principles – Explained
1. Help clients understand when advice is appropriate
Getting you informed. That is the purpose of principle one. It’s an educational process. Giving everyone the opportunity to receive good impartial financial advice.
A Gold Standard Adviser will make available to you, and help you read, generic impartial information on pension transfers ‘in general’. The goal? To protect you. From seeking and paying for financial advice when a pension transfer would never have been in your best interest. It saves you time. And money.
2. Ensure advice given supports the clients overall financial wellbeing in the context of their stated objectives
The adviser’s role is to get you to focus, not just on the large pot of money you could be receiving, but on your life goals:
e.g. What do you want to achieve in retirement? What do you want your life to look like? We’re not just talking about money. We’re talking about lifestyle. Maybe you want to spend more time in the allotment? Go on an annual cruise? Undertake a house build? Travel the world? Everyone is different.
A financial advisor can’t recommend a pension transfer if they don’t understand the person. As soon as you can clearly state your objectives (soft facts), your financial advisor can link those life goals to your pension pot (hard facts), and see if a transfer is the right option for you.
3. Ensure client understanding and acceptance of all charges
Getting you to understand the costs. It is a regulatory requirement that charges should be clear, transparent and unambiguous. Which means they should be a focal point. Page 1. Headline news.
There are many types of charges. It is vitally important you understand them all. There could be charges for advice. There could be ongoing annual charges involved with pension management. You could be paying a one-off upfront fee. You must know what you are paying for. And you must be given true costs. Often charges are written as a % of something. You want to see actual figures.
4. Ensure the most appropriate and updated technical skills are applied
Getting you highly qualified advice. Principle 4 sets out the qualifications and on-going professional development that a Gold Standard advisor must have. Your financial advisor must have appropriate qualifications. They must continue to do ongoing CPD in this area to maintain their standards and their knowledge. In short. They need to keep up-to-date.
5. Transparent management of Conflicts of Interest
Getting it all out in the open. A simplistic example of a conflict of interest would be if a firm had sales targets or bonus structures. The example given on the Pension Transfer Specialist website is – where a contingent charging model is used (where the fee for the advice to transfer is recovered via the fee to facilitate the transfer).
In layman’s terms, you need to be sure that a financial advisor isn’t doing something just for the money when it’s not in the best interests of the client.
A Gold Standard firm will identify any conflicts of interests (including any caused by charging structures), and how these are mitigated and/ or remedied.
6. Help clients understand the cost of transferring benefits
Getting you to be clear. On what you are giving up. Because a pension of £20k per year in retirement (with no risk that goes up with inflation), looks tiny in comparison to a £500k lump sum transfer.
But if you wanted to buy a similar guaranteed annual pension income (annuity) it might cost you about £1million.
Suddenly the pension transfer doesn’t look quite so shiny. These are just examples. The point is, when you read your suitability report, and are asked to sign a one-page statement saying ‘I am giving up £XX in exchange for the perceived benefits of a move to a more flexible pension environment’ – that you truly understand what you are giving up. All that glitters isn’t gold.
7. Avoid unregulated investments and introducers
Getting you safe investments. Most people should be investing in mainstream investments with well known reputable investment companies that offer the full protection of the Financial Services Protection Schemes (unless you are a highly experienced, high net worth investor). A Gold Standard firm will not offer unregulated investments or collaborate with introducers.
8. Transparency in advice processes and outcomes
Getting you robust processes. A Gold Standard firm will have clearly defined step-by-step processes. What that means is that they will know how many clients / prospective clients they have spoken to over the last 12 months. Who went on to receive advice. Who went on to take advice. Who transferred. Who did not.
This means you are working with a truly transparent firm. They offer transparent practices which help achieve best outcomes for their clients. They can easily provide information to regulators and professional indemnity insurers.
9. Promote the Consumer Guide to the Pension Transfer Gold Standard
Getting you more information. Gold Standard advisers must ensure that all prospective clients have received the Gold Standard Consumer Guide before entering the advice process.
Download and Read the Consumer Guide here.
The full Gold Standard explanations of the above principles can be read here
What does Pension Gold Standard mean for a Pension Transfer Specialist
The Pension Gold Standard helps to develop trust and transparency. It offers financial advisors a clear set of nine principles to work to that deliver excellent customer outcomes. It helps consumers make informed decisions. It offers everyone a clear framework to work within. It also allows financial advisors to show that they are working to an incredibly high standard of ethical practices.
Why Should I seek Financial Advice for my Pension Transfer?
It’s a legal requirement. Since 2014. If you have a Defined benefit pension worth more than £30,000, you must seek Final Salary Transfer advice from a defined benefit pension transfer specialist before you will be able to transfer your pension.
The regulatory changes were part of the Pensions Act allowing people to access their defined contribution pensions from age 55. Whilst this gave millions of people access to their pension pots the complexity of the transfers left many worse off. Which is why the government changed the law to ensure that people sought professional advice to understand the risks involved.
You can find out more about these regulatory changes, why they occurred, and what that means for you here.
Beyond the regulatory requirements, a Pension Transfer Specialist can offer financial advice that could save you from making costly mistakes that could impact your and your family’s long-term financial wellbeing.
A pension transfer is an irrevocable decision, so you must be sure you’re making the right one. A financial adviser can help you assess whether that is the case, and if you do decide to move your pension, they can help make sure your money is invested appropriately.
What is a Final Salary Pension?
A Final Aalary (or defined benefit) pension is a pension someone acquires through their job / occupation. Final Salary/Defined Benefit Pensions pay a person a guaranteed income, for life, when they retire. Final Salary Pensions are often seen as ‘golden’ pension deals because they offer guaranteed income when a person retires (which often rises with inflation) and pays attractive death benefits (such as the pension transferring to the surviving spouse).
Read more in our Final Salary Pension Guide
Do I need a Financial Advisor for my Pension?
You don’t need a financial advisor for the state pension or guaranteed pensions.
If you have a defined benefit pension worth more than £30,000 and you wish to transfer it then legally you must seek advice.
If you have a defined contribution pension it would be wise to seek advice. Zurich estimates that almost 41% of those in drawdown without advice will run out of money in retirement. So if you’re thinking of moving from the security of a defined benefit pension to a riskier defined contribution scheme, it’s prudent to get the right advice.
It might seem counterintuitive to pay someone to manage your money. But research has shown that overall having a financial adviser makes you wealthier in the long-run.
For most of us it’s likely our retirement could span over 30 years. You’re faced with having to manage and invest a large pot of money that you can’t afford to lose. You need to take enough out to live on without taking too much and running out. But you don’t know how long you need the money to last – this is where a financial advisor can help.
How to Choose a Financial Adviser – Important Things to Check
The Gold Standard Consumer Guide and the Gold Standard certification offers you guidance when seeking a financial advisor. But here are some other points we think you should consider:
Important things to check:
- Are they authorised by the FCA?
- Are they a Qualified Pension Transfer Specialist?
- Do they have experience of Final Salary Pension Transfer?
- Can they provide references?
- What are their initial and ongoing charges? You can find details of our charges here – view our fees
You can read our full guide on how to choose a financial advisor here.
Remember: Do your homework. And be thorough. It’s important to find the right Financial Adviser for you.
* The Pensions Advice Taskforce
Pensions Advice Taskforce is a representative body set up by The Personal Finance Society, a professional body for the financial advisory profession in the UK. Their role is to promote ethical behaviour, high standards of professionalism for technical knowledge and client service for the ultimate benefit of the profession and consumer alike. It is part of the Chartered Insurance Institute, the world’s largest professional body dedicated to insurance and personal finance that seeks to ‘secure and justify the confidence of the public’.