The FCA has warned firms that ignore its concerns about poor pensions transfer advice will face “serious consequences” in an update published today.
The update concerns the regulator’s latest work into the pensions transfer market that finds less than 50 per cent of the advice it reviewed was suitable.
This statistic is based on data it gathered from 45 firms throughout the year, 18 of which had their files reviewed and offices visited.
Since April 2015, these 18 firms gave advice on to 48,248 clients on their defined benefit pension schemes, which resulted in 24,919 actual pension transfers.
The watchdog looked at 18 firms’ processes and reviewed the advice they gave on 154 transfers.
It finds 74 or 48 per cent were suitable, 45 or 29 per cent were unsuitable and 35 or 23 per cent of the transfers were unclear.
This compares with results across previous phases of work in this area that found 49 per cent of advice was suitable, 33 per cent unsuitable and 18 per cent unclear.
An update in October 2017 showed poor suitability results was due to firms failing to obtain enough information about clients’ needs and personal circumstances.
Similarly some firms failed to consider the needs of the client alongside the client’s objectives when making a recommendation.
Finally some firms did not make an adequate assessment of the risk a client is willing and able to take in relation to their pension benefits.
The FCA says it is disappointed that the current review of the advice given reveals many of the same shortcomings identified last year and it will take action if needed.
It adds firms failing to review or amend their business models in light of its concerns can expect serious consequences.
Reacting to the figures Aegon pensions director Steven Cameron says: “While the headline statistics in the FCA’s latest publication on DB transfer advice don’t make great reading, they are heavily skewed by the four firms who varied or surrendered permissions, where only 1 of 32 files was found suitable.
“With the FCA having published new guidance earlier this year, the focus should be on ensuring future advice is of a high quality, addressing the weaknesses of the past. Areas of concern highlighted in these latest findings are in line with those already addressed in the latest guidance.”