The Financial Conduct Authority (FCA) has expressed its disappointment to have found that less than 50 per cent (49 per cent) of the pension transfer advice it reviewed was deemed as “suitable”.
The authority reviewed the advice given to 48,248 clients across 18 firms, focusing on the advice provided in relation to defined benefit (DB) pension schemes, which resulted in almost 30,000 actual pension transfers. Following the FCA’s assessments, two firms voluntarily ceased providing pension transfer advice, while a further two varied their business models and surrendered their pension transfer advice permissions.
Though the work was targeted and the authority therefore cannot conclude that the results are representative of the whole market, it made clear that it is particularly concerned that firms are still failing to give consistently suitable advice, despite the feedback that has been provided.
On announcing the findings, the FCA said: “Our assessing suitability review in 2017 showed that around 90% of advice on pensions and investments was suitable. It is unacceptable that pension transfer advice should persistently remain at such a low level in comparison to investment advice.”
The regulator found that firms had recommended transfers where the client’s needs and circumstances meant that retaining the DB pension would have been in their best interests, and reaffirmed its expectation that advisers to start from the position that a pension transfer is not suitable.
However, it also found instances where firms had advised a member to retain their benefits when it would have been suitable to transfer them.
Furthermore, The FCA identified that 33 per cent of advice was unsuitable and was unable to determine whether the advice was suitable or not in 18 per cent of cases.
Commenting on the findings, Aegon pensions director Steven Cameron said: “With the FCA having published new guidance earlier this year, the focus should be on ensuring future advice is of a high quality, addressing the weaknesses of the past. Areas of concern highlighted in these latest findings are in line with those already addressed in the latest guidance.”
Cameron added that advisers that take this findings, and those published earlier on in the year, into consideration should have “much greater confidence” in the advice they are giving, particularly with the regulator making its expectations “very clear”.
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