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FSA warns firms about pension transfers

The FSA has warned firms that it is difficult to produce a direct offer pack for a defined benefit pension transfer that meets its financial promotions requirements.

It says such a decision is likely to be too complex for a consumer without specialist knowledge to make and it will be very difficult for a financial promotion to fully explain the risks.

The regulator has warned firms that in reviewing such material it will start from the presumption that such transfers are not suitable and will enhance its supervisory scrutiny of these activities.

In November 2007 the FSA highlighted the complexity of conducting DB pension transfer business on a direct offer basis where members of DB occupational pension schemes receive promotional information packs encouraging them to transfer out without advice.

The FSA says: “Information sent by firms to pension scheme members must be clear and easy for them to understand so that they can make an informed decision. In addition, the information in such promotions will need to be sufficient and presented in a way likely to be understood by the average reader and include an accurate, sufficient and balanced indication of the benefits and risks.”

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