Some advisers have reported their PI premiums soaring since the FCA doubled the Financial Ombudsman award limit from £150,000 to £350,000 on 1 April, says the PFS.
Excesses have also soared.
The FCA increased the ombudsman's award limit despite warnings that the move could cause further problems with the “already hardening” professional indemnity insurance market, says the PFS.
The professional body, which has 37,000 members, has been contacted by many financial advisers who have experienced significant increases in their professional indemnity premiums. It has raised the issue with government.
Advisers have said the increased PI premiums are “forcing” them to increase what they charge for their services as well as making them consider no longer offering DB pension transfer advice.
One adviser who contacted the society said that their professional indemnity insurer increased their policy limits so that cover would remain FCA-compliant but would only allow his business to carry out three more defined benefit transfer cases.
After querying the cost to lift the three case limit, the adviser was told their premium would increase from 3 per cent to 5 per cent of turnover and excess levels would be raised from £20,000 to £25,000 on defined benefit transfer cases.
The adviser, who wished to remain anonymous, told the PFS: “As a small firm turning over £200,000 a year and focussed on only a few select clients this leaves us looking to cancel our defined benefit transfer permissions and (we are) seriously concerned about being able to obtain PII cover.”
Another adviser revealed they saw their PI premium increase from £5,800 last year to £14,050 this year with the excess on DB transfers increasing from £5,000 in 2017 to £20,000 now.
A third adviser revealed last year PI had cost his business £6,700 but this year the premium was more than £27,000, despite the fact his company had not advised on any British Steel pension transfers.
Keith Richards, chief executive of the Personal Finance Society, said: “The raising of the Financial Ombudsman Service compensation is already having a material impact on the cost to operate for many firms whilst reducing access and the affordability of that advice, a key conflict with the Financial Advice Market Review (FAMR) objectives.
“The increased compensation limit is either stopping or driving financial advisers to consider no longer advising on pension transfers and therefore preventing people from being able to exercise their rights under pension freedoms which the PFS has raised with government.”
The FCA has said it would consider allowing financial advisers extra time to make arrangements for alternative professional indemnity cover in light of the ombudsman award increase and also said it expected PI insurers to "deal fairly" with financial advisers searching for compliant insurance.