FCA confirms final rules on improving the quality of pension transfer advice
05 October 2018
The Financial Conduct Authority (FCA) has published feedback and final rules and guidance from its consultation on improving the quality of pension transfer advice.
The FCA is taking forward most of the proposals put forward for consultation in March 2018, which mainly related to transfers from defined benefit (DB) to defined contribution (DC) pension schemes. This consultation proposed further changes to its rules and guidance on advising on transferring from safeguarded benefit schemes (where there is some form of guarantee or promise about the rate of secure pension income that the member will receive, or will have an option to receive).
The changes include a requirement for all pension transfer specialists to hold a specific qualification for providing advice on investments by October 2020, enabling advisers to identify whether a proposed pension scheme and investment solution are consistent with the client’s needs and objectives. The FCA also expects advisers to consider their client’s attitude to, and understanding of, the risks of giving up safeguarded benefits for flexible benefits.
These new rules should improve the advice that people get when considering transferring their pension, including as a result of the pension freedoms.
As part of the consultation, the FCA also sought views on whether to intervene in charging structures. This could include banning contingent charging, which is when a fee for advice is only paid when a transfer goes ahead. It also asked about the impact on access to advice due to restrictions on charging models.
The FCA’s work on improving the quality of pension transfer advice has been ongoing since 2015 and following the supervisory work, a number of firms have stopped providing pension transfer advice. It is also continuing to speak directly to advisers about what good and bad practice looks like at a series of Live and Local events.
Christopher Woolard, FCA's executive director of strategy and competition said:
“These new rules will mean advisers have greater certainty and confidence in what we expect when they offer pension transfer advice.
We expect our interventions to improve the quality of advice which will help to reduce the number of complaints against advisory firms. We will measure consumer outcomes through our supervisory work.
Any changes to our rules on contingent charging could have implications for the supply of advice. Because of the significance of this issue to all stakeholders in the market, we will carry out further analysis and consult on new interventions if appropriate in the first half of next year.”
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Tax exemption on employer-provided pension advice A reminder that on 6 April 2017 an Income Tax exemption became available to cover the first £500 worth of workplace pensions advice (and general financial and tax issues relating to pensions) provided to an employee per year. See HMRC’s Employment Income Manual EIM21803 for information on the conditions that need to be met to benefit from the exemption. |