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Cashback and Consumer Duty

Journalist: Scott Gallacher, Newspage Newsdesk

ended 11. December 2023

Following Hargreaves Lansdown announcing its latest cashback offer last week, touted as the biggest in its history with cash incentives of as much as £3,500 up for grabs, IFAs have shared their views on this type of promotion.

One has suggested that, given the pre-Christmas timing, the incentive may not be in line with Consumer Duty.

Scott Gallacher, director at Leicester-based wealth manager, Rowley Turton, said: “It's important to remember that this cashback deal is a sales move from Hargreaves Lansdown rather than a Christmas giveaway. And, given a poor year that saw Hargreaves Lansdown fall out of the FTSE 100, I'm not surprised that they are trying to boost their business. However, in percentage terms, the cashback sums involved are rather modest for investors. They are equivalent to a year or so of Hargreaves Lansdown's platform fees. Consequently, it's not really much of a giveaway, especially as there are cheaper platforms out there. While the cashback deal may serve as a bonus for those already planning a transfer, I am concerned that vulnerable people might be tempted to transfer purely for the cashback. This is perhaps a particular risk with Christmas, and the associated costs, fast approaching. Consequently, I'd question whether or not this offer is in keeping with the FCA's new Consumer Duty rules, especially concerning preventing ‘foreseeable harm’.”

Joshua Gerstler, chartered financial planner at Borehamwood-based The Orchard Practice, said the cashback deal could be “a nice little bonus” but also had reservations: “Whilst there does not appear to be anything necessarily wrong with being offered cashback to move your pension, you should not move your pension for this reason alone. Your pension should be with a provider who gives you the best value for money and the best chance of achieving your retirement goals. A few thousand pounds now sounds nice, but you could end up paying much more than that in fees, lost investment returns or penalties to your existing provider if you have not looked into it properly. If you leave Hargreaves Lansdown within a year of the transfer, they are allowed to ask you to repay the money you received. If you have completed your research and are planning on moving your pension to Hargreaves Lansdown anyway, then it is a nice little bonus. If you think you will be better off elsewhere, don't let the pounds sign persuade you otherwise.”

Riz Malik, Independent Financial Adviser at Southend-on-Sea-based wealth manager, R3 Wealth, added: “Cashback offers often draw significant interest. It's important, however, that individuals aren't so enticed by the cashback that they overlook potential exit fees and the advantages of their existing arrangements. In this tiered cashback system, the top reward of £3,500 is exclusive to transfers over £1 million, while smaller transfers yield much lower cashback amounts.”

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3 responses from the Newspage community

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Scott Gallacher
Director at Rowley Turton
It's important to remember that this cash deal is a sales move from Hargreaves Lansdown rather than a Christmas giveaway. And, given a poor year that saw Hargreaves Lansdown fall out of the FTSE 100, I'm not surprised that they are trying to boost their business. However, in percentage terms, the cashback sums involved are rather modest for investors. They are equivalent to a year or so of Hargreaves Lansdown's platform fees. Consequently, it's not really much of a giveaway, especially as there are cheaper platforms out there. While the cashback deal may serve as a bonus for those already planning a transfer, I am concerned that vulnerable people might be tempted to transfer purely for the cashback. This is perhaps a particular risk with Christmas, and the associated costs, fast approaching. Consequently, I'd question whether or not this offer is in keeping with the FCA's new Consumer Duty rules, especially concerning preventing ‘foreseeable harm’."
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Riz Malik
Independent Financial Adviser at R3 Wealth
Cashback offers often draw significant interest. It's important, however, that individuals aren't so enticed by the cashback that they overlook potential exit fees and the advantages of their existing arrangements. In this tiered cashback system, the top reward of £3,500 is exclusive to transfers over £1 million, while smaller transfers yield much lower cashback amounts.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
Whilst there does not appear to be anything necessarily wrong with being offered cashback to move your pension, you should not move your pension for this reason alone. Your pension should be with a provider who gives you the best value for money and the best chance of achieving your retirement goals. A few thousand pounds now sounds nice, but you could end up paying much more than that in fees, lost investment returns or penalties to your existing provider if you have not looked into it properly. If you leave Hargreaves Lansdown within a year of the transfer, they are allowed to ask you to repay the money you received. If you have completed your research and are planning on moving your pension to Hargreaves Lansdown anyway, then it is a nice little bonus. If you think you will be better off elsewhere, don't let the pounds sign persuade you otherwise.