The FCA has announced a radical overhaul of the qualifications needed to advise on pension transfers following the Budget reforms.
In a consultation paper published today on changes to its pension transfer rules, the FCA says advice on all transfers from DB to DC schemes require the pension transfer specialist qualification, regardless of whether the transferred benefits are being crystallised.
It says that rules previously set out in a 2011 factsheet no longer provide “adequate consumer protection”.
The factsheet stated that the transfer specialist qualification was not necessary for DB to DC transfers where there was evidence the transfer was for the purpose of crystallising benefits.
The regulator also says a requirement is being added to the Pension Schemes Bill which will make advice compulsory for transfers of pension benefits with a guaranteed annuity rate.
This will not apply for pots worth less than £30,000 or where the benefits are used to buy an annuity.
Those advising on GARs will not need the pension transfer specialist qualification.
In addition, the FCA says transfers from occupational DC schemes without safeguards to personal or stakeholder pensions will also be included in its definition of a pension transfer and therefore require a pension transfer specialist qualification.
It says it considered an exemption for DC schemes, but decided against it due to consumer protection concerns. In September, Money Marketing reported the FCA was considering relaxing qualification requirements for advice on DC to drawdown transfers.
The FCA says it estimates 35,000 people per year will transfer out of DB schemes following the pension reforms. It says this will create a need for an additional 45 advisers with the pension transfer specialist qualification.
Syndaxi Chartered Financial Planners managing director Robert Reid says: “The core of activity in pensions over the last few years has involved transferring benefits. The pensions transfer specialist will be in high demand following these changes and will be able to write their own salary level.
“Some firms will struggle to justify a full-time pension transfer specialist and some agencies offering these services will be equally challenged by the inevitable requirement to become regulated and take responsibility where they didn’t previously.”