FCA requests adviser files on DB transfers

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The FCA has asked advice firms to provide files and further information on their approach to defined benefit pension transfers, Money Marketing understands.

Data requests have been sent by the regulator to a number of advice firms since the start of the year regarding DB transfers. These have been targeted at firms which have been identified as doing higher levels of business.

A source who has seen several letters says: “The FCA has been out and asked firms that they know were more active on DB transfers. They’re not going out lock stock and barrel, but there’s been more information requests at the beginning of this year to try and get a greater understanding on the market.”

The source says they have not seen any feedback from the regulator as yet on its enquiries.

The FCA says its not currently planning to carry out a thematic review on DB transfers, which would involve a wider type of review where the FCA conducts site visits, investigates risks and suggests resolutions for problems.

An FCA spokeswoman says: “As part of our ongoing supervision of firms in the retail investment space we do contact firms from time to time for more information about their business. This can include information such as data relating to DB pension transfer business.

“At the moment there is no such thematic review being considered in relation to DB pension transfers.”

The suitability test

The regulator previously said its review of advice suitability was not specifically targeted at DB pension transfer recommendations.

It has put out a number of guidance notes on the issue, including warning advisers they cannot outsource the responsibility for their recommendations if they use third parties in the advice process. It also made clear advisers would have to have regard to the assets the client’s funds will be invested in.

Letters sent to advice firms last year confirmed the FCA had reviewed DB transfer advice in the wake of the pension freedoms by collecting a sample of client files at the end of 2015.

Former FCA technical specialist Rory Percival says: “There are a number of data requests the FCA will want to do in addition to its normal regulatory returns. It’s obvious post-pension freedoms a lot of that went out and is still going out.

“In relation to advisers I wouldn’t be surprised if there was now a regular data request on pension freedoms where they required information, particularly on DB transfers.”

Getting redress right

The regulator recently set out reforms to how redress should be calculated over unsuitable DB transfer advice.

This will include updating the inflation rates used to better reflect likely inflation, but also making allowance for enhanced transfer value and updating the way the value of the DB benefits are calculated had the consumer not transferred out, and acknowledging savers are likely to take tax-free cash.