The Financial Conduct Authority (FCA) has been saying for some time that it has concerns about the pension transfer market. With this in mind, and with its consultation into the matter now having finished, it has announced a series of new rules in this area.
One of the most far-reaching changes will be the requirement for all individuals who are classed as ‘pension transfer specialists’ to hold a Level 4 Diploma advice qualification by October 2020 at the latest. The specialist may not always be giving the advice themselves, but these individuals may be called upon to check the suitability of pension transfer advice given by their colleagues.
That change will take two years to fully take effect, however firms should already be complying with some of the other changes, which include:
- A requirement to explore clients’ attitudes to the general risks associated with a transfer, in addition to their attitude to investment risks
- A requirement for the advice to consider both the proposed scheme and the proposed investments within that scheme that the funds would be transferred to
- A need for the advice to take into account the impact of the loss of any safeguarded benefits
- An obligation for firms to provide a suitability report to the client in all cases, even if no transfer takes place, in which case the report would need to explain why the transfer was not recommended
Financial adviser trade bodies do appear however to have won one of their battles with the regulator, at least for now. The FCA is not at present proposing to introduce a ban on the practice of contingent charging, which is where a firm only charges a fee to the client if the pension transfer goes ahead. The FCA said “the evidence it has seen does not show that contingent charging is the main driver of poor outcomes for customers.”
The FCA is also not planning to amend the definition of a pension transfer.
Christopher Woolard, the FCA’s Executive Director of Strategy and Competition said:
“These new rules will mean advisers have greater certainty and confidence in what we expect when they offer pension transfer advice.
“We expect our interventions to improve the quality of advice which will help to reduce the number of complaints against advisory firms. We will measure consumer outcomes through our supervisory work.”
“Any changes to our rules on contingent charging could have implications for the supply of advice. Because of the significance of this issue to all stakeholders in the market, we will carry out further analysis and consult on new interventions if appropriate in the first half of next year.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article