ATEB regularly undertakes file checks on defined benefit transfers. We frequently reject cases, primarily as the suitability of the transfer is unclear or unsafe. Recent figures released by the FCA indicate that our findings are probably a reflection of what is happening in the wider market.

The FCA has disclosed that, since October 2015, it has reviewed 88 cases where the advice was to transfer. The results were:

• 47% were suitable;
• 17% were unsuitable;
• 36% were unclear.

i.e. less than half were deemed suitable!

The shortcomings included:

• failing to obtain enough information about clients’ needs and personal circumstances;
• failing to consider the needs of the client alongside the client’s objectives when making a recommendation;
• not making an adequate assessment of the risk that clients are willing and able to take in relation to pension benefits.

The FCA also highlighted that some advisers had failed to make appropriate comparisons between DB schemes and the intended receiving scheme, meaning advice was based on inaccurate information.

The findings show that many firms were working to processes and procedures which resulted in transfers where the suitability of advice simply could not be established by the firm.

But it wasn’t just the rationale for recommending a transfer that was found to be wanting. In relation to the suitability of the recommended product and fund, the FCA found that –

• 35% were suitable
• 24% were unsuitable
• 40% were unclear

The detail behind these findings was not published but, based on our own findings and previous FCA alerts, we suspect that a mismatch with the client’s risk profile is likely to have been involved in many of these cases.

Serious concerns were also raised about specialist transfer firms receiving introductions from firms that do not have transfer permissions. Concerns included:

• inadequate information sharing between firms, with the specialist not knowing clients’ needs;
• the specialist not making a recommendation for a receiving scheme or investments, hence no meaningful comparison could take place;
• increased transfer business volumes but no commensurate increase in compliance resource.