Financial Conduct Authority
FCA confirms final rules on improving the quality of pension transfer advice
The Financial Conduct Authority (FCA) yesterday published feedback and final rules and guidance from its consultation on improving the quality of pension transfer advice.
Yesterday the FCA published new rules aimed at improving the advice people receive when considering transferring their pension. This policy statement confirms that the FCA is taking forward most of the proposals put forward for consultation in March 2018, which mainly related to transfers from defined benefit (DB) to defined contribution (DC) pension schemes. This consultation proposed further changes to its rules and guidance on advising on transferring from safeguarded benefit schemes (where there is some form of guarantee or promise about the rate of secure pension income that the member will receive, or will have an option to receive).
The changes include a requirement for all pension transfer specialists to hold a specific qualification for providing advice on investments by October 2020, enabling advisers to identify whether a proposed pension scheme and investment solution is consistent with the client’s needs and objectives. The FCA also expects advisers to consider their client’s attitude to, and understanding of, the risks of giving up safeguarded benefits for flexible benefits. These new rules should improve the advice that people get when considering transferring their pension, including as a result of the pension freedoms.
As part of the consultation, the FCA also sought views on whether to intervene in charging structures. This could include banning contingent charging, which is when a fee for advice is only paid when a transfer goes ahead. It also asked about the impact on access to advice due to restrictions on charging models.
Contingent charging is a complex area and the responses to the FCA’s consultation confirm its initial analysis that the evidence it has seen does not show that contingent charging is the main driver of poor outcomes for customers. The FCA’s supervisory work to date has also identified a number of other causes of poor advice, and it will carry out further work on the quality of advice.
The FCA’s work on improving the quality of pension transfer advice has been ongoing since 2015 and following our supervisory work, a number of firms have stopped providing pension transfer advice. It is also continuing to speak directly to advisers about what good and bad practice looks like at a series of Live and Local events.
Christopher Woolard, FCA's Executive Director of Strategy and Competition said:
“These new rules will mean advisers have greater certainty and confidence in what we expect when they offer pension transfer advice.
“We expect our interventions to improve the quality of advice which will help to reduce the number of complaints against advisory firms. We will measure consumer outcomes through our supervisory work.”
“Any changes to our rules on contingent charging could have implications for the supply of advice. Because of the significance of this issue to all stakeholders in the market, we will carry out further analysis and consult on new interventions if appropriate in the first half of next year.”
Notes to editors
- PS18/20: Improving the quality of pension transfer advice
- CP18/7: Improving the quality of pension transfer advice
- CP17/16 Advising on Pension Transfers
- Find out more information about the FCA.
Latest News from
Financial Conduct Authority
FCA and TPR publish joint pensions strategy19/10/2018 14:20:00
The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have launched a joint regulatory strategy aimed at strengthening their relationship, and taking joint action to deliver better outcomes for pension savers and those entering retirement.
FCA confirms greater access for SMEs to the Financial Ombudsman Service17/10/2018 10:25:00
The Financial Conduct Authority (FCA) yesterday confirmed plans to extend access to the Financial Ombudsman Service (‘the ombudsman service’) to more small and medium-sized enterprises (SMEs).
FCA opens a discussion on the impact of climate change and green finance on financial services16/10/2018 10:20:00
The Financial Conduct Authority (FCA) yesterday published a Discussion Paper on climate change and green finance.
The FCA consults on its approach ahead of the UK’s exit from the EU11/10/2018 10:25:00
The Financial Conduct Authority (FCA) yesterday published two consultation papers, setting out its proposals in the event the UK leaves the European Union on 29 March 2019 without an implementation period. It also set out its approach to the regulation of Credit Rating Agencies, Trade Repositories and Data Reporting Services Providers.
FCA consults on new rules to improve the approach to open-ended funds investing in illiquid assets09/10/2018 10:25:00
The Financial Conduct Authority (FCA) is consulting on new rules and guidance to reduce the potential for harm to investors in funds that hold illiquid assets, particularly under stressed market conditions. These measures will also support the FCA’s market integrity objective and help address financial stability concerns.
FCA and SFC sign MoU on United Kingdom-Hong Kong Mutual Recognition of Funds08/10/2018 14:10:00
The Financial Conduct Authority (FCA) and the Securities and Futures Commission (SFC) have entered into a Memorandum of Understanding on Mutual Recognition of Funds (MoU), which will allow eligible Hong Kong public funds and United Kingdom retail funds to be distributed in each other’s market through a streamlined process.
FCA fines Tesco Bank £16.4m for failures in 2016 cyber attack02/10/2018 10:25:00
The Financial Conduct Authority (FCA) has fined Tesco Personal Finance plc (Tesco Bank) £16,400,000 for failing to exercise due skill, care and diligence in protecting its personal current account holders against a cyber attack. The cyber attack took place in November 2016.
Financial Conduct Authority publishes Decision Notice concerning Linear Investments Limited28/09/2018 14:10:00
The Financial Conduct Authority (FCA) yesterday published a Decision Notice concerning Linear Investments Limited. Linear failed to take reasonable care to organise and control its affairs responsibly and effectively to ensure potential instances of market abuse could be detected and reported.
The FCA announces outcome of investigation into 4 life insurance companies20/09/2018 11:25:00
The Financial Conduct Authority (FCA) yesterday announced that its remaining investigations into firms, following its thematic review into the fair treatment of longstanding customers in the life insurance sector, have each been closed.