Out-Law News | 25 Jun 2019 | 12:06 pm | 1 min. read
Data gathered by the financial regulator shows that a majority of DB scheme members who had received advice on transferring their pension out of the scheme had been recommended to do so.
Pensions expert Alastair Meeks of Pinsent Masons, the law firm behind Out-Law, said: “The FCA remains concerned about the quality of advice being given by some firms."
“Even allowing for the fact that those seeking transfer advice are not a random cross-section of pension scheme society, the number of transfers recommended seems inexplicably high. The cynical might think that in some cases the advice given is as likely to be intended to protect the position of the adviser as to help the customer reach a decision,” Meeks said.
“This can put pension scheme trustees in an invidious position. They may well have qualms about whether a transfer request is in the member’s best interests but when they are under a statutory duty to provide a transfer value and make a transfer payment, their hands may well be tied,” Meeks said.
Even allowing for the fact that those seeking transfer advice are not a random cross-section of pension scheme society, the number of transfers recommended seems inexplicably high.
The FCA said the total value of DB pensions where transfer advice had been provided was £82.8 billion with an average value of £352,303.
A majority of firms had recommended that 75% of more of their clients should transfer their pensions, although the FCA said that only 55% of clients who had been “triaged” through these firms’ internal guidance services were recommended to transfer.
The regulator said it would use the data to inform its supervision work designed to drive up the quality of advice. It has begun visiting firms to complete a full assessment of their approach to DB advice, focusing on key aspects of firms’ business models and processes which could give rise to harm.
It will also write to all firms where the potential for harm has been identified in the data the firm has supplied, setting out its expectations and the actions firms should take.
The FCA said it wanted pension transfer advice to reach the same standard as the wider financial advice market where advice is suitable in around 90% of cases.
“While 90% suitability still gives scope for improvement, the disparity between the quality of advice on DB transfers and that on investments is of significant concern to us,” the FCA said.
In 2017 the FCA found that less than half of those seeking pension transfer advice received suitable guidance.
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