FCA proposes changes to advice on pension transfers

The UK’s financial watchdog The Financial Conduct Authority (FCA) has today published new proposals on advice relating to defined benefit pension transfers.

Following on from a series of moves where the UK financial services regulator has, with various international pension transfer specialist company’s support, seen a number of organisations cease pension transfer business in the UK, the FCA has today outlined a series of proposals to overhaul pension transfers rules.

The FCA believes that further protection is necessary where consumers have safeguarded benefits, primarily for transfers from defined benefit to defined contribution pension schemes. It said, in a statement announcing the changes that its proposals aim to “reflect the current environment and the increased demand for pension transfer advice”.

Since the introduction of the pension freedoms in April 2015, consumers have more options available to access their pension savings. This has combined with more recent changes to the financial environment leading to historically high levels of transfer values, the FCA said

‘Expectations of advisers’

The new rules outline the FCA’s “expectations of advisers” and pension transfer specialists to ensure that consumers receive advice which considers all relevant factors. They build on an FCA alert on advising on pension transfers published in January, as reported.

The proposed changes include requiring transfer advice to be provided as a personal recommendation, and replacing the current transfer value analysis with a comparison to show the value of the benefits being given up. Taken together as a package, the proposals will ensure that advice fully takes account of an individual’s circumstances so that consumers make the right decision for them.

Christopher Woolard, executive director of strategy and competition at the FCA said: “Defined benefit pensions, and other safeguarded benefits such as guarantees, are valuable so most consumers will be best advised to keep them. However, we recognise that the environment has changed significantly, so we want to ensure that financial advice considers the customer’s circumstances in full and recognises the various options now available to them.

“Our new approach should better equip advisers to give the right advice so that consumers make well informed decisions.”

The FCA proposals include:

  • replacing the current transfer value analysis requirement (TVA) with a comparison showing the value of the benefits being given up
  • introducing a rule to require all advice in this area to be provided as a personal recommendation, which fully reflects the client’s circumstances and provides a recommended course of action
  • updating our guidance on assessing suitability when giving a personal recommendation to convert or transfer safeguarded benefits, so that advisers focus on whether a transaction is right for a particular individual
  • introducing guidance on the role of a pension transfer specialist
Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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