Policy Statement PS 20/06

On 5 June, the FCA published the long awaited policy statement following its consultation from 2019, CP 19/25. The policy statement was accompanied by a substantial Guidance Consultation covering the FCA’s proposals for guidance on how firms should implement the new rules. Consultation feedback is required by 4 September 2020. 

While primarily trailed as being about the decision to ban contingent charging for defined benefit transfer advice, the paper covers a great many other aspects, many of which represent significant rule changes, including:

  • Ban on contingent charging;
  • Exceptions to the ban;
  • Abridged advice;
  • Requirement for firms to consider using the client’s existing workplace pension as a destination for the transfer.

Other ancillary topics covered include new rules and guidance around:

  • Triage services;
  • Two adviser model;
  • Personalised charging document;
  • Mandatory one page summary for suitability reports;
  • Client understanding;
  • Data reporting;
  • Introducers;
  • CPD;
  • Cash flow modelling;
  • Estimated transfer values.

Most of the new requirements take effect on 1 October 2020 with some transitional arrangements applying to pipeline cases. We will be writing about the different aspects in more detail over the coming couple of weeks.

However, two of the rule/guidance changes take effect from 15 June 2020 so we outline those below.

Triage services
The FCA reminds firms that triage must be a purely educational exercise in order to ensure that they do not stray inadvertently across the regulated advice boundary.

In addition, firms can use decision trees and RAG-rated questionnaires as educational tools in other forms of guidance, unrelated to pension transfer advice, such as where the consumer has a range of available options, but because firms can only make a binary recommendation on whether or not to transfer when giving advice on pension transfers and conversions, these tools carry a high risk of crossing the advice boundary for pension transfer advice. For this reason, perimeter guidance is that firms should not use decision trees or RAG-rated questionnaires when giving triage services on pension transfers or conversions.


Estimated transfer values
Firms can give provisional advice where only estimated transfer values are available, in cases when ceding scheme arrangements are expected to be changed or replaced by another scheme.

In these circumstances, the ceding scheme usually requires the scheme member to provide an indicative decision about opting into the changed or replacement arrangements. The scheme then uses this information to determine final transfer values. Members need to be able to make an informed decision based on the estimated transfer value.

If a hybrid scheme is changing or replacing its safeguarded arrangements, the final guidance applies in the same way as for other affected schemes, assuming the benefits need to be treated as safeguarded for transfer purposes.

Where a scheme is undergoing a s.143 assessment to enter the PPF, only previously confirmed transfers out are allowed. Where a scheme is leaving the PPF so the scheme arrangements are being changed or replaced, and a member has an estimated transfer value, the final guidance applies.

Advisers are expected to finalise their advice once details of the final transfer value and the changed or replacement ceding arrangement are both available. Firms should not give advice based on estimated transfer values except where the ceding scheme arrangements are expected to be changed or replaced.

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 policy statement is a substantial paper and introduces significant changes to the rules and guidance around transfer advice. Every firm that provides transfer advice, or introduces clients to a third party transfer adviser will need to be aware of the new requirements and make changes to their advice processes and documentation.

Firms have until 1 October to prepare for the new environment with the exception of the changed guidance on triage and estimated transfer values which both take effect on 15 June 2020.

Action Required By You

  • Firms will need to familiarise themselves with the new rules and guidance;
  • Review processes and documentation and amend as required;
  • Contact your ATEB Consultant for further assistance or contact ATEB here.
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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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