Clients at risk from unregulated providers
30 March 2015
- Nearly two out of five advisers are concerned their clients could be targeted
- But the risk of running out of money is the biggest threat to the success of pension freedoms
Nearly two out of five (37 per cent) advisers fear their clients could be targeted by potentially risky offers from unregulated firms following the launch of pension freedoms,according to new research from Prudential1.
Its study shows advisers believe the biggest threat to the success of pension freedoms is the risk of retirement savers running out of money after cashing in funds but there is widespread concern about clients taking unsuitable products.
Around 66 per cent of advisers said the risk of running out of money was the most significant threat to pension freedoms ahead of 63 per cent who fear that retirement savers will mistake guidance for advice.
More than six out of 10 (61 per cent) believe the risk of savers buying unsuitable retirement income solutions is a major worry making it the third biggest threat to the success of the new rules which take effect from 6 April 2015.
Advisers are more optimistic that their clients will not be targeted by risky offers from unregulated firms – around 59 per cent say they are not concerned. However 86 per cent believe retirement savers in general will be targeted.
Vince Smith-Hughes, retirement expert at Prudential, said: “The launch of pension freedoms is a major opportunity for advisers and providers to substantially boost clients’ interest in and understanding of retirement saving.
“But there are clear risks from people being targeted by unregulated providers offering solutions which seem to promise better returns without explaining the potential risks.
“The industry is working to help offer warnings to clients but it remains the case that expert financial advice on retirement options will be more important than ever following the launch of pension freedom.”
Nearly half of advisers surveyed (49 per cent) believe the political risk of further law changes is a major threat to the success of pension freedoms while 52 per cent warn that the possibility of savers incurring unnecessary tax bills will undermine the reforms.
Notes to editors
1 PollRight interviewed 120 advisers online on behalf of Prudential between 31st December 2014 and January 9th 2015
The information contained in Prudential UK's press releases is intended solely for journalists and should not be used by consumers to make financial decisions. Full consumer product information can be found at www.pru.co.uk.
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