Beware the ‘free’ pension review

The BBC broadcast a fairly sensationalist episode of Panorama yesterday evening, looking at pensions and charges.

In our opinion, parts of the broadcast lacked balance or a thorough analysis of the real issues.

We recognise that it is sometimes difficult to condense these very technically complex subjects into a thirty minute segment and keep them simple enough for viewers at home to understand.

Informed Choice chartered financial planner Martin Bamford has commented on the programme in Money Marketing today:

Informed Choice managing director Martin Bamford says the programme was sensationalist, but he hopes it will act as a wake up call to investors.

He says: “They were obviously highlighting some of the worst case scenarios and some of the providers and funds were ones that as an investor you would not want to be in.”

He added: “The subject was not as well covered as it could have been but if the end result is to send people off to seek professional advice and take more of an interest then it is probably a good outcome.”

One thing we noticed quite quickly in aftermath of the Panorama programme was a number of financial advisers offering a ‘free’ review of existing pension plans.

We hope that viewers of the Panorama show with concerns about their pension plans, in terms of unsuitable investment funds and high charges, will seek professional advice. It is important to point out that offers of a ‘free’ review, even from an independent financial adviser, are unlikely to be entirely unbiased.

The aim of advisers offering a ‘free’ review of any existing arrangements, including pension plans, is to identify opportunities to transfer plans and earn commission.

This practice is being tidied up from the end of 2012, when the Financial Services Authority (FSA) bans commission payments that are funded from product charges. Instead, adviser remuneration will have to be taken cleanly from any pension or investment products.

If you are tempted to accept the offer of a ‘free’ pension review, always question the motivation of the adviser – an individual who will only get paid if they recommend a movement of money.

Many independent financial advisers who operate on this basis act with impartiality and integrity. There remains the risk that their offer of ‘free’ advice is not so altruistic.

A better approach is to work with an independent financial adviser who charges a fee for the impartial advice, regardless of the outcome. This way, you can be sure that the advice you receive will have no hidden motivation to move money around without real justification.

Beware the ‘free’ pension review. In fact, beware the ‘free’ anything!