FCA triples estimate of pension transfer specialists needed

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The FCA has significantly altered its estimates for the number of advisers who will need the pension transfer specialist qualification to deal with demand for transfers out of defined benefit schemes.

In March the regulator consulted on radical changes to the qualifications needed to advise on pension transfers following the Budget reforms.

It estimated that 35,000 people per year will transfer out of DB schemes, creating a need for an additional 45 advisers with the pension transfer specialist qualification.

But experts warned the FCA had seriously underestimated demand and the number of advisers that would be needed.

In final rules published today, the FCA says it now believes 130 more advisers with the specialist qualification are needed, almost triple the initial estimate.

And it says the changes will create ongoing costs for firms of between £500,000 and £1.6m, up from an original estimate of £340,000.

The FCA says the estimated benefits remain unchanged at £5-10m, based on an assumption that those transferring out of DB schemes would benefit from advice equivalent to 5 per cent of their total pension wealth.

The regulator says respondents to its consultation raised a number of questions about the assumptions it had used in its cost benefit analysis.

It says: “We had based our one-off cost estimates on data available at the time of the original analysis. We continue to think that many of the assumptions used then were valid.

“However, given the range of responses we acknowledge that one-off costs could be higher than estimated.”

The FCA originally said 7.5 hours of advice are needed for each transfer, but says it now assumes advice will take twice as long.

It has also doubled the opportunity cost of each hour of an adviser’s time while preparing for qualifications from £29 to £58.

In addition, the regulator has acknowledged that there will not be a “perfect match” between those providing advice and those needing it.

The FCA originally assumed that pension transfer specialists would spend nearly all their time providing advice, but now assumes that 1.5 specialists will be required for every one specialist needed, given some of their time will be spent on non-advice activities.