FCA DB Transfer ‘Advice Checker’

A busy week for the FCA last week saw the publication of PS20/6, which gives effect to the proposals from CP19/25, the primary impact being the decision to ban contingent charging for most pensions transfer advice and GC 20/1 – yet another guidance consultation on pension transfer advice.

We will be writing in more detail on PS20/6 in the near future.

Meantime, the FCA also announced that it will be writing to around 7,700 British Steel members who transferred out to “… help them revisit the advice they received, and to complain if they have concerns”. This would appear to be a new step in the Regulator’s, so far, uphill battle against what it considers to be unsuitable transfer advice and could prove to be controversial.

Meantime, in addition to the British Steel communication, the FCA has continued in a similar vein by publishing guidance for consumers on its website. The purpose of the guidance is pretty transparent from its headline and tagline:

Advice checker: defined benefit pension transfers 

Find out if the advice you received was right for you, and what to do if you think it wasn’t.”

The guidance lists a number of factors the FCA believes might be indicative of unsuitable advice. Whether or not firms agree with any or all of these, it makes sense for firms to be aware of these and review advice processes and suitability report templates accordingly.

A few of the headline points are as follows, with the FCA stating that if a consumer can relate to even one statement, then it is possible that he/she may have received poor DB transfer advice and might have a valid complaint. 

  • The adviser focused on one or more of the following:
    – giving you flexibility and control of your pension;
    – maximising the death benefits payable in the event of your death;
    – helping you achieve early retirement;
    – helping you take a larger tax-free lump sum;
  • The adviser recommended, in writing, that you should not transfer but hinted you should do so anyway;
  • The pension you transferred was your only or largest guaranteed pension, and you had few other assets to support yourself in retirement, apart from the state pension;
  • The adviser did not ask you for all of the following:
    – information about you and your family, and how much income you 
      need to support your family during your retirement;
    – information about you and (if relevant, your spouse/partner’s)
      employment, current income and spending, tax position,
      entitlement to state pension or state benefits;
    – information about your health (and partner’s health, if relevant);
    – your and your spouse’s other pensions and assets or debts, and
      any dependency on state benefits (and partner’s details, if
    – your priorities and spending plans for your retirement;
    – how much risk you felt comfortable with and the extent to which
      you were prepared to accept a reduced lifestyle in retirement if
      investments performed poorly.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

This whole area is littered with unintended consequences, not least the banning of contingent charging. Then there are the apparently unsolvable PII issues and the not unrelated reality of an ever dwindling number of firms that are willing to provide transfer advice and so on.

Yet, most people, wherever they stand on a particular aspect would probably agree that the situation around DB transfers is definitely in the category of ‘something must be done’. Trouble is, there is no consensus or easy answer as to what that ‘something’ is!

Action Required By You

  • Consider whether any of the factors listed might apply to past advice;
  • Review current processes and templates against the listed factors;
  • ATEB have significant experience of helping firms to create compliant transfer advice processes – contact your usual ATEB Consultant for further assistance or contact ATEB directly.
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About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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