IFoA warns of risks in new pensions freedoms

• Anyone looking to transfer their benefits out of a Defined Benefit pensions scheme needs to understand the pros, cons and risks of the choices they make.
• Potential that unscrupulous selling could see individuals lose ‘income for life’ guarantee
• Life Insurance companies should ensure pensions products sold to individuals are fit for purpose

The Institute and Faculty of Actuaries (IFoA) warns of the risks surrounding the new pensions freedoms coming into effect in April 2015.  Individual members of Defined Benefit (DB) pension schemes may be targeted to transfer out of their current schemes and into Defined Contribution (DC) schemes to enable them to benefit from the new freedoms.  However, individuals need to understand the risks this involves. The IFoA has published guidance for its members ahead of the April changes.

Desmond  Hudson, Chair of the IFoA’s Regulation Board comments,

“There is a danger that unscrupulous selling or advice to the unwary could see individuals suffering financial loss.  People who transfer benefits out of their existing DB schemes and into DC schemes may be accepting more risk than they realise by giving up a lifetime income.  The IFoA is also encouraging life insurance companies to develop products for the new retirement market that are fit for purpose for the individuals who would be purchasing them and do all they reasonably can to ensure well informed decisions are being made .

“The public should be reassured that actuaries have professional responsibilities when providing advice, as IFoA members have an obligation to observe the principles of The Actuaries’ Code in the public interest that promote confidence in the work of actuaries and the actuarial profession.

 “The IFoA expects its members working in both the pensions and life insurance industries to ensure any advice given is objective and considers all the risks.  This includes any advice given to employers providing DB schemes, providers of retirement products, individual scheme members, scheme trustees and potential clients.”

~ENDS~

For further comment or to answer any questions that you may have please contact Annette Heninger at the IFoA on 07525 592 198 or by emailing annette.heninger@actuaries.org.uk

Editorial notes

About the Institute and Faculty of Actuaries

The Institute and Faculty of Actuaries (IFoA) is a royal chartered, not-for-profit, professional body.

Research undertaken by the IFoA is not commercial.  As a learned society, research helps us to fulfil two of our royal charter requirements; to further actuarial science and serve the public interest. 

Actuaries provide commercial, financial and prudential advice on the management of a business’s assets and liabilities, especially where long term management and planning are critical to the success of any business venture. They also advise individuals, and advise on social and public interest issues.

Members of the IFoA have a statutory role in the supervision of pension funds and life insurance companies. They also have a statutory role to provide actuarial opinions for managing agents at Lloyd’s.

Members are governed by the Institute and Faculty of Actuaries. A rigorous examination system is supported by a programme of continuing professional development and a professional code of conduct supports high standards reflecting the significant role of actuaries in society.