The Financial Conduct Authority (FCA) has published new rules on pension transfer advice and is seeking views on additional changes, including adviser charging structures.
The FCA stated 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 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.
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 and whether it should intervene in relation to charging structures.
The FCA has decided to maintain its position at this stage that an adviser should start from the assumption that a defined benefit pension transfer will be unsuitable.
The authority explained that 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.
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.
He added: “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.”
