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FCA proposes scrapping assumption DB transfers are unsuitable

Regulator admits rollout of pension freedoms has “altered the options available” and for some consumers a transfer may now be suitable

The FCA is proposing removing guidance that asks advisers to assume defined benefit transfers are unsuitable, as the regulator puts forward new rules for dealing with clients looking to transfer.

Current FCA rules ask advisers to start from the position that a DB transfer is not in the client’s best interests.

In a consultation paper published this morning, the FCA says it will look to change its guidance so that holding on to safeguarded benefits will “likely” be in their client’s best interests, but no assumptions need to be made either way by the adviser.

The paper reads: “It remains our view that keeping safeguarded benefits will be in the best interests of most consumers. However, the introduction of the pension freedoms has altered the options available and for some consumers a transfer may now be suitable when it wasn’t previously. We therefore propose to remove the existing guidance that an adviser should start from the assumption that a transfer will be unsuitable.”

The regulator has also suggested making new rules to make sure DB transfers are personal recommendations so they give “appropriate protection for consumers”.

The paper reads: “To make informed decisions, consumers need to understand the specific details of their safeguarded benefits, make an assessment of their value of this benefit for their specific circumstances and compare this to the value of alternative options.

FCA steps up scrutiny of DB transfer advice

“In the few cases we have seen of advisers claiming they are not giving a personal recommendation we have found the advice did not comply with the existing analysis requirements and in many cases is actually a personal recommendation.”

In January, the FCA published guidance reminding advisers they had to consider where the client’s funds would be invested, not just a critical yield, and could not absolve responsibility for the advice if they used an outsourced provider.

Building on this guidance today, the FCA proposes further information for advisers on how they should consider alternative ways of meeting the same objectives as a DB transfer.

The FCA is carrying out what it calls a “multi-firm supervision exercise” on DB transfers, where it has approached a number of firms for client files before following up on any concerns.

The regulator has not revealed how many or which firms are involved.

Intelligent Pensions, one of the biggest outsourcers in the market, has entered a voluntary agreement with the FCA to cease its pension transfer business, which Money Marketing understands to be related to the review.

Roughly 80,000 DB transfers took place last year, according to estimates from The Regulator.



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. paolo standerwick 21st June 2017 at 10:29 am

    I hope the FOS is listening?

  2. Time to buy shares in CMCs…

  3. I forget which US boss said that there is one constant in life – change. However, unlike in the past, the rate of change now is rapid.
    The question arises as to why the FCA was so slow to respond and why, as an arms length regulator, they do not say to the Government “you are moving too fast.”

  4. Whilst welcoming the new softer approach, it changes very little, if anything.
    We are two years in to pension freedoms, you would have thought by now the highly qualified senior officials within the FCA and FOS would be able to offer greater and clearer guidance, best practice than what has been offered.
    What I find more amusing is there will be a picture of a senior FCA official, with a face like a rabbit caught in the headlights, when this all goes horribly wrong, with the usual phoenix to a regulators name afterwards.
    For the first time ever, there is more than enough evidence that the professional bodies and advisers have been screaming what needs to be done, unfortunately no one is listening or is it a case of now one wants the liability.

  5. Is this because of political pressure or …….

    Well its hardly common sense… is it ?

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