Concerns over a “brewing pension scandal” are to be raised with ministers after the Financial Times reported that savers were being wrongly advised or pressured to give up valuable final salary pension benefits.
Over the past two years more than £50bn has flowed out of company “defined benefit” retirement plans by savers transferring their secure benefits to riskier personal pensions.
The surge in transfer activity has been fuelled by recent reforms that made personal pensions more appealing to those who want full control over how they spend their retirement cash, or to pass a fund to heirs.
Soaring cash transfer values made by schemes to members, driven by market conditions, have also tempted more than 220,000 people to transfer.
“Government reforms in 2015 led to the unlocking of pension pots for more than 200,000 people,” Nick Smith, a Labour MP, told the House of Commons on Thursday. “But today’s Financial Times reports high-pressure sales tactics, scaremongering and mis-selling, so may we have a statement? It looks as if another pensions scandal is brewing.”
Andrea Leadsom, leader of the House and a Conservative MP, said the report was “alarming”, adding: “I am sure that he will find a way to raise it with ministers.”
Mr Smith later told the FT that he will be putting questions to Treasury ministers next week about pension mis-selling fears.
The exchange came as the Financial Conduct Authority was closely scrutinising the pension market for mis-selling following a boom in transfer activity.
Four firms, which were not named by the City regulator, stopped advising on transfers when the FCA began to examine the market.
The FCA has said it remains in most people’s best interests not to give up a defined benefit pension, which pays a secure, indexed income for life.
Concerns have risen that some advisers are encouraging transfers by using doubts over the security of company pension funds. Others have warned that employers were stoking interest in transfers, by offering to pay transfer advice costs for members.
Pensions rules require those with defined benefit scheme rights worth more than £30,000 to obtain advice from a regulated independent financial adviser before they can transfer.
Royal London, a mutual insurer, estimated a further 120,000 transfers could be made in 2017-18.
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