FCA to review redress for unsuitable pension transfer advice

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The FCA wants to change how redress is calculated for unsuitable pension transfer advice as it believes the current system is flawed.

The regulator says it plans to consult in the autumn on whether to update the current method for calculating redress relating to unsuitable advice to transfer away from defined benefit schemes.

Currently, the redress system used by the industry and the Financial Ombudsman Service dates back to the Pensions Review of 1990s.

It was aimed at putting consumers back in the position they would have been if they had stayed in the DB scheme, but the FCA says it is concerned the way redress is calculated may no longer achieve this.

The FCA admits plans to change the redress system may cause delay for some clients who have cause to complain.

If firms are currently handling a pension transfer advice complaint, they should continue to investigate the claim.

In the event the firm needs to offer redress, the FCA says it expects firms to write to clients to explain it cannot provide a final response. Firms may look to offer provisional redress with a view to providing a further response and potentially further redress once the outcome of the consultation is known.

The FCA says it would not expect firms to settle the complaint on a “full and final” basis.

It adds following the consultation, it expects to reach conclusions by spring next year.