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FCA review finds poor advice in third of ETV pension transfers

An FCA thematic review into bulk pension transfers from defined benefit to defined contribution schemes has identified poor advice in a third of cases.

The regulator looked at 300 cases from bulk transfer advice exercises between 2008 and 2012 where savers were offered enhanced transfer values to incentivise them to leave their employers’ DB scheme.

The FCA says there is a risk of consumers losing out on retirement income after advice was found to be unsuitable in a third of cases.

In the coming weeks the FCA will follow up its concerns with individual advice firms and ask them to contact members and offer redress where appropriate.

FCA director of supervision Clive Adamson says: “Transferring from a DB scheme to a DC scheme is an important decision for consumers. It is disappointing that our review saw failings in the advice given, particularly when incentives have been provided to consumers to transfer.
“All firms active in this complex area of pension transfer activity should think very carefully about the quality of the advice process and assurance framework required to deliver fair customer outcomes.”

Employers offering enhancements typically offer an increase in the pension transfer value. In the period covered by the review, the incentive may also have included a cash payment.

Examples of poor practice identified by the review include:

  • Generic templates which were inadequately tailored to reflect specific member circumstances
  • Advice where the outcome focused solely on critical yield analysis
  • Failure to establish adequately the level of risk a member is willing and able to take
  • Fund recommendations which did not match the risk profile of the member
  •  The use of default receiving schemes, in some cases with uncompetitive charging structures
  • Limited consideration of the tax and means-tested benefit implications of accepting the offer.

The FCA says that, given the pension reforms taking effect from next April and the Government’s decision not to ban transfers from DB to DC schemes, there is currently a “heightened risk” of unsuitable transfers.


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  1. This sounds very much like a revival of the Pensions Review. That said, I suppose the FCA is of the view that it’s justified on the basis that seems not to have learned lessons from the past.

    Then again, one wonders if the redress calculations will take account of the fact that many schemes from which former members have been advised to transfer out the CETV of their preserved benefits have subsequently been wound up with a deficit and that, as a result, those preserved benefits would now no longer be worth what they were at the date of the transfer. In the current claim-for-anything world in which we have to struggle to survive, some former members of now wound-up-in-deficit schemes may even complain that they’ve been disadvantaged because they were advised NOT to transfer out. But, will say the adviser, the comparative projections at the time just didn’t stack up (even though we’ve not seen 5% p.a. inflation for many years). I don’t care about that says the complainant (egged on by his CMC), I told you at the time that both the company and its pension scheme were in bad shape but you refused to take any notice. You gave me wrong advice and I want compensation. And what will be the view of the FOS?

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