FCA Pension Transfer Workshop

The FCA has been running a series of workshops up and down the country, giving feedback to firms on their findings around pension transfer advice. Having attended one of the events, we thought it would be useful to share the content here for the benefit of firms that were not able to attend. 

From our point of view, we were delighted to note that ATEB’s guidance is totally aligned with the FCA’s position as regards transfers.

Here’s a brief summary of the points the FCA particularly highlighted:


The FCA’s main concern is that clients are making poor decisions concerning:

  • the decision to transfer;
  • the underlying investment destination.

Action: Firms should assess whether the transfer process addresses these concerns. 


The main failing on the part of advisers is inadequate KYC:

  • in particular, there is poor assessment of risk; both investment risk and the risks of transfer;
  • advisers are not assessing client needs and not challenging client objectives;
  • KYC is focused on current circumstances and needs, with no indication of future (retirement) circumstances and needs;
  • it should be noted that the FCA regards the main client need as (probably) income in retirement;
  • death benefits are often highlighted as a need or objective, but the file does not evidence any analysis of the client’s actual requirements for death benefits.

Action: Advisers should think about appropriate KYC tools specifically in support of pension transfer advice.

Action: The advice process must differentiate between investment risk and the risks of transfer (any conflicts should be identified and resolved).

Action: The adviser must been seen to measure client needs versus objectives (objectives should be probed and challenged).

Action: If death benefits are a need/objective, the file must evidence an analysis of the client’s death benefit requirements now and in the future.


Understanding ceding scheme benefits
The adviser’s assessment of a ceding scheme can be flawed:

  • The main concern is that adequately detailed scheme information is simply not obtained;
  • The ‘underfunded’ position of a scheme is often overplayed;
  • Advisers highlight ‘penalties’, which are not penalties;
  • Advisers are not sufficiently competent to assess scheme benefits (or don’t bother).

Suggested action: Full ceding scheme details must be obtained (an industry standard trustee template for providing scheme information should be available from May/June 2019).

Suggested action: Firms should ensure that advisers are assessing scheme benefits accurately and in a balanced way.


Appropriate Pension Transfer Analysis (APTA) and Transfer Value Comparator (TVC):

  • The TVC is mandatory whether advice is geared to early retirement, normal retirement date or late retirement;
  • The FCA still sees a role for critical yield as part of the APTA (if it is an appropriate measure);
  • The adviser should tailor the APTA to the specific circumstances and needs of the client;
  • The FCA has no intention of mandating the content and format of the APTA, as it is considered to be case-specific;
  • The FCA has no intention of mandating the use of cash-flow modelling.

Action: Firm’s must ensure that their communication of the TVC and the APTA is balanced and objective, and it places the client in a truly informed position.

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

The message on the day to advisers was for them to be objective, thorough and fair when delivering pension transfer advice. Without going into a debate on contingent vs non-contingent charging, there is undoubtedly a huge temptation for clients to want to transfer and be able to access what can be a once in a lifetime chance of having a large pot of cash, and a similar temptation for advisers to find reasons to satisfy the client’s desire. But what the client wants is not necessarily the same thing as what the client needs and one of the most fundamental responsibilities that advisers have is to help the client identify what is in his or her best interests. That often means challenging superficial and vague ‘objectives’ such as ‘control’ and ‘flexibility’. Client preferences are not the same as client objectives. We often see cases where the adviser has not challenged the client in this respect.

We also see the whole area of death benefits being poorly handled. It is not sufficient to have a couple of whole life quotes on file and devote a couple of lines in the suitability report to mentioning ‘the option of life cover’ in passing before quickly discounting it as ‘too expensive’, without any apparent discussion with the client.

Interesting that the FCA ‘have no intention of making cash flow modelling mandatory’. This is consistent with reasoned conclusions from previous consultations. However, many firms do use cash flow modelling in relation to pension transfer advice. The problem is that the assumptions used are almost always not compliant. We will be writing more on this in the near future.


The FCA highlighted 8 points that it looks for when checking a pension transfer file:

  • Are client-specific objectives evidenced?
  • Are personal circumstances evidenced?
  • Has risk been assessed; both investment risk and the risks of transfer?
  • Have income needs in retirement been identified?
  • Has any need for capital been identified?
  • Has loss of benefits and guarantees been explained to the client?
  • Has the adviser adequately assessed the suitability of the proposed investment destination?
  • What alternatives to a transfer have been explored?

Action Required By You

  • Firms should take note and ensure that their transfer process addresses these points;
  • Contact your usual consultant or contact ATEB if you would like to discuss any aspect in more detail.
  • See here for details of ATEB’s experience in helping firms give compliant transfer advice.
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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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