The Financial Conduct Authority (FCA) has today outlined proposals designed to improve the quality of pension transfer advice.
You can read the full document here: https://www.fca.org.uk/publication/policy/ps18-20.pdf
Key points
• The FCA has made absolutely clear pension transfer advice must consider both the transfer recommendation AND the underlying investments subsequently chosen
• To reflect this, Pension Transfer Specialists will be required to hold a Level 4 Investment Advice qualification by October 2020
• The regulator will also carry out further work on advice models which require a transfer to take place for the adviser to get paid, referred to as ‘contingent charging’
Tom Selby, senior analyst at AJ Bell, comments:
“A perfect storm of pension freedoms, corporate instability and historically high transfer values have seen tens of billions of pounds transferred from defined benefit schemes to defined contribution plans in recent years.
“While the regulator continues to state that in most circumstances people are best advised to stay where they are, demand for advice remains high and there are cases where a transfer is in the client’s best interests.
“Given the supply of pension transfer advice has already been constricted by a number of factors – including rising Professional Indemnity costs and adviser fears of future complaints - the FCA faced a difficult balancing act in developing these recommendations. On the one hand, the regulator clearly wants to ensure consumers receive the best advice possible, but on the other hand it also wants as many people as possible to be able to access that advice.
“The measured set of proposals announced today strike the right tone. On contingent charging – arguably the most controversial area of DB transfer advice – the FCA is right to focus on outcomes rather than rhetoric.
“Ultimately the aim here is to ensure more people are able to pay for good quality regulated advice, so any measure that risks reducing the supply of advice – or cutting off those with less ability to pay upfront – needs to be carefully thought through and evidence-based.”
