Understanding the FCA changes to pension transfer rules

The FCA has begun consulting on changes to its requirements around advice on pension transfers where clients have safeguarded benefits; in particular, defined benefit transfers. The proposals seek to recognise that the economic and legislative environment has changed significantly.

If you are active in this market, you can contribute by completing the online response form consisting of 17 questions. It is not necessary to provide detailed answers to every question but you should contribute as this is an important area which could have a long-term impact on the sector.

What is changing?

  • A shift in the long-standing FCA position that advisers should start from the standpoint a DB transfer is unsuitable, to a revised position that it will be likely retaining safeguarded benefits will be in the client’s best interests in most cases
  • The transfer value analysis requirement is to be replaced with a comparison showing the value of the benefits being given up, known as an Apta. The Apta is required to consider underlying investments to be used
  • New guidance on role and definition of a pension transfer specialist, including the outsourcing of this role
  • A new rule to require all advice in this area to be provided as a personal recommendation
  • Additional guidance on how to handle insistent clients.

Discussion is invited in these other areas but no rules are proposed:

  • Pension transfer specialist qualification and experience requirements
  • Assumptions for revaluation and indexation used in DB benefits analysis
  • Overseas transfers
  • The use of cashflow planning.

The consultation ends on 21 September, with final rules expected to be confirmed in a policy statement by early 2018.

Phil Young is managing director at Threesixty




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