The FCA is stepping up its supervision of defined benefit transfer advice as fresh data shows a significant majority of clients are being told to transfer.
The regulator has revealed the results of a data collection exercise this morning, which shows that of the 234,951 scheme members that had received advice on transferring between April 2015 and September 2018, 162,047, or 69 per cent, had been recommended to transfer out.
This compares to the 72,904, or 31 per cent, that had been recommended not to transfer.
Of the 2,426 firms had provided advice on transferring their DB pension, 1,454 had recommended 75 per cent or more of their clients to transfer.
A total of 59,086 clients who did not proceed to full advice after a triage process.
Of those advised not to transfer, 13 per cent went ahead as insistent clients. Of everyone who transferred, 70 per cent continued to receive ongoing advice from the firm that recommended it.
Though the regulator notes that the data is and of itself does not indicate the suitability of each transfer, the high levels of transfer recommendations fly in the face of the FCA’s position that transfers are likely to be unsuitable in most cases.
The regulator writes: “The FCA has repeatedly made clear its expectations of financial advisers as well as strengthening the rules around pension transfer advice. Despite this, too much advice the FCA have seen to date is still not of an acceptable standard.”
The FCA says it has begun visits to firms, with those most active at the top of the list, and will also be writing to firms where the data they supplied suggests customers may be at risk of harm.
FCA supervision director Megan Butler says: “We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable. It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.
“Deciding whether to transfer out of a DB scheme is one of the most complex financial decision a consumer may have to make and it is vital customers get high quality advice. Our ambition is for pension transfer advice to reach the same standard as that of the rest of the financial advice market.”