'Next April could herald PPI style scandal for pensions'

The pension reforms risk creating another PPI-style scandal, a financial services firm's founder says. Portal Financial, one of the UK's largest pension advisers, has warned of the potential conflict of interests between what is best for the pension provider and what is best for the client.Like the PPI scandal, the issue centres on the regulated providers' obligation to treat customers fairly and whether withdrawing money without appropriate advice could lead to future claims.Jamie Smith-Thompson, managing director of Portal Financial and one of its founders, said the key consideration was whether pension providers act solely on their clients' instructions and facilitate withdrawals from their existing schemes regardless of the impact on their clients' future finances.He said this could risk a subsequent claim if their actions turn out to have been seriously detrimental, or recommend independent advice and risk losing the business if their client transfers to a more suitable scheme.Mr Smith-Thompson, said: "Our concern is that pension providers – typically insurance companies - will act on clients' instructions without looking at the implications."We deal with hundreds of people each week who are looking to take money before they retire under the existing regulations and we advise many that it is not in their best interests. {desktop}{/desktop}{mobile}{/mobile} "We would not expect the situation to change come next April. We do not want a repeat of the PPI scandal."As we know, the banks found out to their cost that the interpretation of treating customers fairly can be applied retrospectively. Financial advisers are strictly regulated and are required to have specific qualifications for a reason."Portal Financial warned that the government has been making promises that pension providers may not be able to keep, as many have processes that were never designed for on-going / rapid withdrawal.Clients may act in haste without necessarily understanding the financial implications of their decisions, Mr Smith-Thompson said.This could include the potential impact on any benefits payments, he said.It could also be for somebody with multiple pensions who withdrew the smallest one at 55, that they would immediately slash their annual allowance on contributions, which could lead to a large retrospective tax bill.

'Next April could herald PPI style scandal for pensions'

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