Tuesday, 07 November 2017 10:36

Prestwood urges mandatory cashflow modelling for pensions

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Prestwood founder Paul Etheridge Prestwood founder Paul Etheridge

Prestwood has called for the introduction of “mandatory” cashflow modelling to be used in retirement planning to tackle mis-selling.

The cashflow modelling software provider believes the use of cashflow modelling is the only long term way to cut down on pensions mis-selling and pension scams.

Launching its White Paper at the PFS Festival of Financial Planning today, the cashflow modelling provider says it is proposing solutions to the ‘pensions timebomb’ it warned would happen three years ago.

Prestwood founder Paul Etheridge said: “Since 2015, (pension freedom) savers have accessed £14.2bn. The freedom to access pensions has resulted in a swathe of bad advice and mis-selling scams. Our biggest concern is that a whole generation of our society will be unable to afford their cost of living post-retirement.

“We contend that all firms providing any kind of retirement advice or marketing must use some form of cashflow modelling. This is a crucial step towards protecting consumers from mis-selling and giving clarity to them; reducing IFAs’ PI insurance; and restoring faith in our profession.”

Keith Richards, chief executive of the PFS, said: “Since the introduction of pension freedoms, cashflow modelling has increasingly become an essential planning tool whilst also helping to ensure better client engagement, understanding and confidence.”

Julie Lord CFP and Chartered Financial Planner and director of Prestwood said: “If advisers do not, as a community, improve the way they communicate these messages of risk and action to their clients, our profession will continue to be slated and called to account. More seriously, our ageing population will not be cared for by a Government knee-deep in debt.”

Prestwood says current data points to continuing problems and complaints about pensions. In the Financial Ombudsman Services' annual review, investment and pension complaints for the year 2016/17 show:
*personal pension plans are 13 % of the total
*small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) form 11%, up 34% on the previous year
*52% of investment and pension complaints were about sales and advice
*the uphold rate for the top five most complained-about products: self-invested personal pensions (SIPPs) is 64% and for personal pensions 39%

Prestwood asked the Ombudsman how many of these upheld complaints involved firms using cashflow modelling. However, although the FOS has seen a rise of complaints in this area it does record the processes used to provide advice, says Prestwood.

The company says it is “our expectation” that none of the firms where complaints were upheld used a lifetime cashflow model to determine the suitability of the advice.

Prestwood has also asked the FCA for their view and is still waiting for a response, it said.


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