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Contingent charging still damaging advice impartiality, says LEBC

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.

Alan Hughes: FCA is not on a mission to end DB transfers

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.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Duncan Gafney 16th May 2019 at 3:36 pm

    Tell you what Ms Ingram, when you can identify how good quality DB advice can be provided for anything approaching £500 you may have a point.

    Until that point for some people the ONLY way they can get the advice they need is on a contingent basis.

    Whilst it might be nice to ban contingent charging in an ideal world, clients with these schemes live in the real world, where ideology often doesn’t work.

  2. David Brookes 16th May 2019 at 3:41 pm

    Excuse me for sounding this thick, but who or what are LEBC?
    Do they know what the run of the mill client looks like and how they would lay their hands on thousands of pounds?

    • They are very active in the DB transfer arena and they do know what a run of the mill client looks like. They have some very good PTSs. A large firm, they are engaged by employers to advise staff. The charges they levy for DB advice are competitive, but part of the reason for that is that, as I understand it, they charge a retainer to the employer. If I was being controversial, I could ask if taking a fee from an employer could mean that an adviser is (maybe subconsciously) incentivised to say “No” to transfer advice, as it keeps the downstream liability for moving someone out of Safeguarded Rights to a minimum. And there is a LOT less work involved…

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