Pension Transfer Advice – FCA’s latest findings

As part of its ongoing supervisory work on DB transfer advice, the FCA has published its latest findings – you can read them here.

The FCA’s findings highlighted that less than 50% of advice was suitable. Several firms failed to collect enough information on clients’ personal circumstances, such as other pensions arrangements or retirement plans. Even where this information was collected, firms did not fully consider it when making a recommendation. While it is important to note that the majority of the unsuitable cases in the FCA’s sample came from just four firms, the criticisms set out are most definitely aimed at all firms.


Specific areas of concern

  • relying on generic objectives during fact finds with clients who wanted to transfer;
  • using objectives which included terms such as ‘flexibility’ or ‘increase pension’ without going into detail about what this meant to the client;
  • not asking whether the client is able or willing to take the risk required to achieve those objectives, or why they were prioritised ahead of the other needs and objectives of the client;
  • putting too much emphasis on the inheritance tax benefits of a transfer;
  • basing a recommendation on the client’s objective to take control of their pension without exploring the reasons for this;
  • not considering how much clients were spending or had coming in before making personal recommendations (i.e. inadequate cash flow planning);
  • failing to consider what happens when a client lives longer than expected after transferring their pension (i.e. ensuring that the money will last as long as the client;
  • not looking at how charges might affect a client’s income after a transfer;
  • inadequacies in the way that they talk about risk and explain risks to clients.


A warning
The FCA stated that “any firm that is active in this market can expect to be involved in our work in 2019” and that “we will next year start a wide-ranging programme of activity with firms”. The FCA also made clear that they “will not hesitate to take action against any firm that continues to present harm to customers”.

There should be no doubt that the FCA is becoming increasingly frustrated by the failings that they continue to encounter, “it is particularly concerning that, despite our feedback to the sector, firms are still failing to give consistently suitable advice …” There is also a political angle taking shape.  Even though Parliament is obviously wading through BREXIT mud and has little time for anything else, Nick Smith (Labour) had the chance to appraise the Prime Minister of the plight of one of his constituents, who had been advised to transfer out of the British Steel scheme.  The Prime Minister replied, “I’m very sorry to hear about his constituent in relation to his pension and the actions of that financial adviser … I will ensure the Treasury looks at this issue with the FCA in these sorts of cases”. The FCA’s frustration, together with the growing political pressure, is likely to mean that FCA scrutiny of firms with transfer permissions will only increase. 

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

Quite simply, it is essential that you review your transfer advice processes.

Action Required By You

  • Familiarise yourself with this article;
  • Review your transfer advice processes;
  • Action as required;
  • Discuss with your ATEB consultant or contact ATEB if you need further clarification or assistance


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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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