The professional body with more than 25,000 members has told the FCA and Treasury that adviser firms are exiting pension transfer advice for DB transfers, with some firms faced with a 500 per cent increase in their professional indemnity insurance premium.
The professional body says it has been contacted by several pension transfer specialists struggling to “obtain or afford” professional indemnity insurance.
The PFS says that one firm was informed their PII premium would increase by more than 500 per cent and that their excess requirement would also significantly increase. Another financial adviser has told the Personal Finance Society they were unable to secure any ongoing professional indemnity cover at all.
The body says due to rocketing premiums many firms are relinquishing their permissions.
The Personal Finance Society warned the FCA and HM Treasury earlier this year that the increase to the Financial Ombudsman Service compensation limit would hit pension transfer advice.
On 1 April the Financial Conduct Authority increased the ombudsman's maximum award limit from £150,000 to £350,000, in effect requiring advisers to increase their level of professional indemnity cover to protect their businesses.
The PFS says its warning earlier in the year about what would happen is now ringing true.
Keith Richards, chief executive of the Personal Finance Society, said: "There needs to be adequate consumer protection but the raising of the Financial Ombudsman Service compensation limit at a time when the PII market was already hardening is having a detrimental impact for consumers and is leaving firms shockingly exposed to financial failure.”
“The raising of the Financial Ombudsman Service compensation limit and increasing focus on the possible outcome of the FCA’s supervisory focus is driving PI insurers away from the market, restricting access to advice and therefore preventing people from being able to exercise their rights under pension freedoms.
“Once again, we are renewing our calls to the FCA and HM Treasury to come up with an alternative to the current professional indemnity insurance market and FSCS compensation scheme levy before the consequences drive the agenda.”