FCA delays changes to DB pension transfer rules

The FCA has revealed that changes to rules around Defined Benefit (DB) pension transfers have been delayed by up to six months.

The regulator had been looking into the DB transfer market since the volume of transfers surged following the introduction of Pension Freedoms in 2015.

In July 2019, the FCA published its final proposals to reform DB transfer advice, which included plans to ban ‘contingent’ charging – which involves charging more for advice if a transfer goes ahead – with limited exceptions, as well as plans to introduce a new form of abridged advice, and to crack down on high ongoing charges after a transfer.

These changes had been expected imminently and until yesterday, the FCA website suggested a policy statement would be due in the first quarter of 2020.

However, the FCA has since revealed it will publish its finalised handbook text in a policy statement in the “second quarter or third quarter of 2020” – meaning changes to the rules around DB transfer advice could be delayed by up to six months.

LCP partner, Clive Harrison, commented: “The DB advice market is very diverse with a mix of high quality advice sitting alongside cases where the FCA finds that members have clearly been given unsuitable advice.

“If the FCA believes that the consumer detriment from poor quality advice runs into billions of pounds, it is very disappointing that measures designed to improve the advice market have been delayed.

“Given the particular concerns in the current Covid-19 environment about pension scheme members being vulnerable to scammers, and poor quality advisers taking advantage of members’ fears, it is vital that consumer protection measures are maintained as far as possible, despite the present situation.”

Aegon pensions director, Steven Cameron, meanwhile welcomed the decision by the FCA to defer its policy statement.

“In these unprecedented times, people need advice more than ever and a contingent charge ban, leaving individuals no choice but to pay upfront for advice, would have made it more difficult for some individuals to access advice on DB transfers,” he added.

“The FCA had proposed a carve out from the ban for those in significant financial hardship, but in the current climate it would have been even harder to objectively assess whether an individual met that definition.
 
“As with everything, the coronavirus crisis affects the considerations around transferring from DB to Defined Contribution (DC). Any decision to give up a guaranteed income for life to access the pension freedoms, with ongoing stock market risks and opportunities is very personal to the individual. This, coupled with scheme by scheme funding impacts and possible changes to transfer value calculation bases mean the value of advice has never been higher.”

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