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PFS chief: Stricter DB transfer advice rules are good news

PFS chief executive Keith Richards

The FCA’s recent proposals to introduce stricter rules on advice requirements for pension transfers are a welcome step in the right direction.

Over the past few months I’ve aired my concerns about the spike in pension transfer activity since pension freedoms, with figures from The Pensions Regulator suggesting 80,000 defined benefit pension transfers took place in the year to the end of March alone.

From an ‘insistent’ client perspective, many advisers have been concerned about the risks of advising on pension transfers, but these concerns will be largely allayed by the FCA’s much needed clarification on advice requirements.

I have also expressed my concerns that a small number of firms are treating pension freedoms as a golden commercial opportunity, and that this could potentially lead to the next mis-selling scandal.

With hundreds of thousands of retirees cashing in their pension pots since pension freedoms, there is a risk that these people could be left high and dry as their cash runs out in retirement.

FCA DB transfer review: The numbers you need to know

The FCA’s proposals recognise that in some cases DB transfers can be beneficial to clients, provided the sound and informed judgment of an experienced professional financial adviser is called upon.

The requirement to disclose a transfer value analysis statement is a good step but on its own is not sufficient. We welcome the fact that this must be combined with the other proposal mandating a personal recommendation in every situation to ensure that the nuances that sit underneath the TVA can be properly explained.

The regulator’s sensible proposals constitute a critical first step towards addressing the complex issue of pension transfers.

We support the FCA opening up the discussion around qualifications, experience and continuing professional development of pensions transfer specialists, and look forward to contributing to this discussion.

Keith Richards is chief executive of the Personal Finance Society

Keith Richards is discussing the future of regulation at Money Marketing Interactive, which is being held at the Majestic Hotel in Harrogate on 14 September. To join over 100 advisers and register to secure your free place, click here


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