The FCA is proposing to ban the use of contingent charging for pension transfers, whereby an adviser is only paid if recommending that a member of a pension scheme makes a transfer.
Under current pension legislation, members wishing to transfer benefits worth at least £30,000 from a defined benefit scheme to a defined contribution arrangement must obtain independent financial advice before the transfer can go ahead.
The FCA believes that contingent charging has led to a conflict situation for advisers and has resulted in a perverse incentive for advisers to recommend transfers which may not be appropriate. The consultation, which follows a series of reviews of how the advice system is operating, aims to improve how advisers manage and deliver pension transfer advice and to address perceived weaknesses that have led to potentially inappropriate transfers being encouraged.
The consultation also includes proposals to improve the quality of advice (including mandatory CPD requirements for advisers in this field), capped charges in the limited circumstances where contingent charging will still be allowed and additional data collection to allow more hands-on regulation by the FCA.
The consultation closes on 30 October 2019.