The Financial Conduct Authority (FCA) has today published new
rules on pension transfer advice and is seeking views on
additional changes, including adviser charging structures. The
new rules and areas for discussion aim to improve the quality of
pension transfer advice to help consumers make informed decisions
for their individual circumstances.
In June 2017, the FCA proposed changes to the rules
on advice on transfers from
safeguarded benefit schemes, mainly for transfers from defined
benefit (DB) to defined contribution pension schemes. Following
consultation, the FCA has published final rules
to ensure transfer advice considers relevant factors.
The new rules include requiring transfer advice to be
provided as a personal recommendation that takes account of a
consumer’s individual circumstances. They also replace the
current transfer value analysis with a requirement to undertake a
personalised analysis of the consumer’s options and a comparison
to show the value of the benefits being given up.
Following on from this work, the FCA has also published a
consultation paper proposing further changes to its rules and
guidance. This includes requiring advisers undertaking pension
transfer advice to have the same qualifications as investment
advisers. The FCA is also seeking views on whether it should
intervene in relation to charging structures given the difficulty
in managing the conflicts of interest that exist when providing
transfer advice. This could include a ban on contingent charging,
which is when a fee for advice is only paid for when a transfer
goes ahead. This is a complex area, where any action taken may
have an impact on access to advice.
The FCA has decided to maintain the position at this
stage that an adviser should start from the assumption
that a DB pension transfer will be unsuitable. This is to
reflect the high proportion of unsuitable advice seen in
supervisory work and need for further consideration of how
transfer advice should be paid for. It should be noted that the
existing guidance on the starting assumption does not, however,
prevent an adviser from recommending a transfer where this is
considered suitable for the consumer.
Christopher Woolard, FCA Executive Director of Strategy and
Competition said:
“Defined benefit pensions are valuable so most people will
be best advised to keep them. However, where people are
considering a transfer, it is vital that they get good advice to
enable them to make an informed decision.
“We are also looking at whether further changes are needed
to improve the quality of advice in this area. In
particular, we recognise that there is an inherent conflict of
interest when advisers use a contingent charging model so we are
asking for views on whether we should ban contingent fees for
pension transfer advice. Defined benefit pension transfer advice
continues to be a key area of focus for the FCA.”
Notes to Editors
-
Policy Statement 18/6:
Advising on Pension Transfers
-
Consultation Paper 18/7:
Improving the quality of pension transfer advice
