FCA has published a package of measures to address weaknesses across the defined benefit transfer market. The key changes will:
- ban contingent charging in almost all circumstances. This will remove the conflict that an adviser would otherwise face if they were to get paid only if a transfer goes ahead, and will mean that good advisers whose advice is to stay put can compete for business;
- require advisers to consider any available workplace pension as a receiving scheme for a transfer and explain why any alternative solution is better. This will help reduce the need and costs for ongoing advice; and
- create an abridged advice process so consumers can get cheaper initial advice – but this is only permitted either to advise the customer not to move or to explain that clear advice cannot be given without a full engagement;
FCA has also issued a guidance consultation identifying good and poor practice in processes to ensure customers get suitable advice. It has also created an “advice checker” for consumers to read, about the advice they have received.
FCA has also updated on its targeted supervisory work, collecting data from over 3,000 firms. Following the review, FCA fed back to over 1,600 of these firms and 700 of them have given up their permission to provide pension transfer advice. But it is not all bad. FCA found, in its in-depth reviews of the 85 firms that have been responsible for 43% of transfers between April 2015 and September 2018, that suitability has improved over time, and was at a level of 60% in 2018. But FCA is still concerned at the number of files that had information gaps or that appeared to be unsuitable (17%). It is undertaking 30 enforcement investigations.
Finally, FCA found a higher proportion of unsuitable files in samples relating to the British Steel Pension Scheme (47% were unsuitable and only 21% suitable). FCA is going to write to all the former members of the scheme who transferred out, so they can reconsider the advice they received, and complain if appropriate.