The FCA has set out a package of measures designed to address weaknesses across the defined benefit transfer market. It includes steps to reduce conflicts of interest by banning contingent charging, as well as help for advisers who want to do the right thing and provide good quality advice to their consumers.
Christopher Woolard, Interim Chief Executive of the FCA said:
"The proportion of customers who have been advised to transfer out of their DB pension is unacceptably high. While much of the advice we looked at was suitable, we are still finding too many cases in which transfers were not in the customer’s best interests.
"What we have set out today builds on the work we have been doing and reflects our determination to improve standards in this market. Customers need to have confidence that the advice they are receiving is right for them. The steps we are announcing today will drive up standards."
The FCA will implement a ban on contingent charging in most circumstances. The ban will remove conflicts of interests which arise where a financial advisor only gets paid if a transfer goes ahead. It will also help good advisers, who will often advise to stay put, to compete. To address ongoing conflicts, advisers must now consider an available workplace pension as a receiving scheme for a transfer and, if they recommend an alternative solution, demonstrate why that alternative is more suitable. This will help reduce the need and costs for ongoing advice.
The FCA will also implement proposals allowing advisers to provide an abridged advice process which will help consumers access initial advice at a more affordable cost. The abridged process can only result in a recommendation not to transfer or a statement that it is unclear whether a consumer would benefit from a pension transfer without giving full advice.
To assist financial advisers giving transfer advice, the FCA has issued a Guidance Consultation designed to help advisers put in place better processes to ensure consumers get suitable advice. The guidance identifies good and poor practice and will help firms identify weaknesses in their existing advice processes.