Contingent charging throws doubt on whether advice to transfer can be truly transparent and should be removed from the industry as a payment structure, LEBC has argued.
Director of public policy Kay Ingram has backed the work and pensions select committee of MPs on their continuing push to ban the contingent charging model this morning.
She says: “Advice to retain defined benefit pensions and the reasons for that advice should always be given in writing.
“That advice has value which needs to be paid for, only charging those who can transfer leads to doubts about the integrity of the advice and encourages poor practice.”
While supporters of contingent charging defend its ability to reduce the advice gap, Ingram says the argument falls flat.
She points to better guidance prior to paid-for advice in the workplace and the use of the employer-sponsored tax-free £500 per year as an alternative. Employees are able to use these funds to access advice on pension transfers among other matters.
She says: “Only charging those whose circumstances mean that a transfer is a viable option is not a sustainable business model nor a fair pricing practice.”
In a statement earlier today, the committee says its view on the damage caused by contingent charging is unchanged following the FCA’s decision not to take up it’s recommendation to ban the practice for DB transfers.