PFS: FCA’s DB transfer data is not representative

Keith Richards

Personal Finance Society chief executive Keith Richards has said the FCA’s data on defined benefit data is not representative and risks spooking the public and insurers.

Last week, the FCA said it would step up its supervision of DB transfer advice as its fresh data showed a significant majority of clients were being told to transfer.

The FCA surveyed 3,015 firms and found that between April 2015 and September 2018, of the 2,426 firms providing DB transfer advice, 1,454 firms had recommended 75 per cent or more of their clients to transfer out of a DB scheme.

When the Money Marketing reported the figures, the Derbyshire Booth Financial managing director Greg Heath commented: “I have serious doubts about these figures.

“I meet many clients and have an informal chat about the process, pros/cons and costs. It becomes apparent that they are unsuitable within the first ten minutes without all the formal advice process being implemented.

“Those clients are not even registered in the figures as a ‘not to transfer’ as it would be a giant waste of money for them to put them through the process.”

The PFS now says the regulator acknowledged that when triage services are taken into account, the percentage figure of 55 per cent was reported.

Advisers flag doubt over DB market performance

Richards says: “It is logical that the FCA will hone their focus on risk-based supervision targeting businesses where there is volume activity and therefore the potential for greater risk to consumers if pension transfer advice processes are found wanting.

“This study is therefore not representative of the wider financial advice community, many of whom don’t advise on DB transfers and those who do in the main may have only advised on a small number of cases to meet the needs of existing clients.

“It is important that reporting of failings is proportionate and does not misrepresent the majority or erode public trust more broadly.

“It is equally important that the profession and professional indemnity insurers do not over-react to this latest FCA data and automatically think there is a widespread problem with the defined benefit transfer advice being given by the entire financial advice profession.”

Richards then went on to say that professionalism was evidenced both by the past FCA reviews, as well as with the fact that hundreds of the trade body’s members signed up for the Pensions Transfer Gold Standard.

Richards said that the government introduced pension freedoms to allow people to do what they what, when they want, no caps, no restrictions.

He comments: “Chancellor George Osborne made it clear that ‘no one ever has to buy an annuity again’. What we need to see is the government, regulators and the profession working together in the wider public best interests.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Peter Cranwell 25th June 2019 at 3:57 pm

    This all sounds eminently sensible – so will probably be ignored.
    I would suggest though, that firms who decide “after 10 minutes” that a transfer is not right for a particular client need to make an effort to document that – otherwise the figures will continue to be skewed?

  2. “Hello, I have a statement from my former employer’s defined benefits scheme and I want advice about whether to transfer to a personal pension”

    “We can provide that advice to you but we deliver it in the context of a full financial planning service which looks at all aspect of your financial future including advice about whether or not to transfer. We cannot look at a transfer of your defined benefits in isolation from everything else”

    “How much do you charge?”

    “As described on our website between £3,500 and £4,500 depending upon the complexity of your situation. That’s an all-in price including any implementation work if that’s the right thing for you to do and our fee is payable regardless of whether you transfer or not”

    “I don’t want to pay that much I just want an adviser to sign off on the transfer”

    “I’m sorry we won’t be able to help you then”

    That’s a cut down version of what plays out of course but it happens quite often.

    Its not, as I understand it, “triage” but genuine question, where does it sit in the statistics?

    • Not frequent, but not unusual client contact either…

      “Hello, are you FCA regulated? Oh, good, would you mind signing a form that my pension scheme has sent me as they won’t send me my money without your signature and I need it to buy a car/cruise/fund a wedding/pay for a conservatory.”

      Careful and considerate explanation of how it works, typically followed by significant unhappiness, sometimes expletives, and occasionally comments about ‘rip-off’.

      Are the FCA even aware of these interactions with the general public? They should be, they should be taking them into account, and and they should be concerned. They are a significant part of the DB transfer picture and Nick Bamford’s last question needs to be answered. If not then the ‘picture’ is going to be more Picasso than Rosetti.

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