PENSION TIMEBOMB TICKING
CALLS GROW FOR MANDATORY CASHFLOW MODELLING FOR PENSIONS
Today, Prestwood launches its White Paper at the PFS Festival of Financial Planning, proposing solutions to the pensions timebomb we warned would happen three years ago. *
Prestwood Founder Paul Etheridge said:
“Since 2015, savers have accessed £14.2bn. The freedom to access pensions has resulted in a swathe of bad advice and mis-selling scams. Our biggest concern is that a whole generation of our society will be unable to afford their cost of living post-retirement.
“We contend that all firms providing any kind of retirement advice or marketing MUST use some form of cashflow modelling. This is a crucial step towards protecting consumers from mis-selling and giving clarity to them; reducing IFAs’ PI insurance; and restoring faith in our profession.”
The internationally accepted 6 steps of financial planning are now firmly embedded in the best advisory firms. However, this must be set against a number of devastating episodes of mis-selling of financial products leading to severe mistrust by consumers of the financial services industry as a whole.
Keith Richards, CEO of the PFS, commented:
“Since the introduction of pension freedoms, cashflow modelling has increasingly become an essential planning tool whilst also helping to ensure better client engagement, understanding and confidence.”
Julie Lord, Director of Prestwood said:
“If advisers do not as a community improve the way they communicate these messages of risk and action to their clients, our profession will continue to be slated and called to account. More seriously, our ageing population will not be cared for by a Government knee-deep in debt.”
In the Financial Ombudsman Services’ annual review, investment and pension complaints for the year 2016/17 make disappointing reading:
*personal pension plans make up 13 %
*small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) form 11%, up 34% on the previous year
*52% of investment and pension complaints were about sales and advice
*the uphold rate for the top five most complained-about products: self-invested personal pensions (SIPPs) 64%; personal pensions 39%
Prestwood asked the Ombudsman how many of these upheld complaints involved firms using cashflow modelling. However, although the FOS clearly sees a rise of complaints in this area it does not drill down to the processes used. It is our expectation that none of the firms where complaints were upheld, used a lifetime cashflow model to determine the suitability of the advice.
Prestwood also asked the FCA for their view and we are still waiting.
Notes to Editors
- Prestwood Software Ltd is part of The Prestwood Group, founded by Paul Etheridge MBE. Prestwood software is developed by Financial Planners for Financial Planners. The Company exists solely to develop and support top of the range programs for Financial Planners in the UK, and Truth is widely recognised as the UK’s leading cashflow modelling software in the lifestyle linked sector.
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