The FCA is planning changes to the way redress should be calculated for those who have received unsuitable advice to transfer out of defined benefit pension.
The regulator announced its intention to consult in August , and asked PwC to carry out a review of the existing method of working out redress and provide recommendations.
In a guidance consultation, published today, the FCA says its proposals are more likely to put consumers back into the position they would have been in had they not been advised to transfer out of their DB scheme.
The changes, which will apply to complaints made after 3 August 2016, include:
- updating the inflation rates used to better reflect likely inflation
- acknowledging the Pension Protection Fund in calculating the rate at which pension investments are expected to grow between the time of the transfer and the consumer’s retirement date
- 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
- making allowance for gender-neutral annuity rates
- assuming that male and female consumers are the same age as their spouse
- making allowance for enhanced transfer values
The FCA says it will look to update these assumptions on a regular basis.
FCA executive director of strategy and competition Christopher Woolard says: “Choosing to transfer out of a DB pension scheme is a big decision for consumers, which requires suitable advice. When that advice proves to be unsuitable, it is important that consumers receive appropriate redress.
“We think there may be more appropriate ways to calculate redress for pension transfer complaints in future, and that is why we are looking at how the calculation works in order to achieve a fair outcome for consumers.”
The consultation closes on 10 June, with the FCA expecting to publish final guidance in the autum.