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FCA DB pension transfer advice proposals should go a step further

25 September 2017

Aegon has welcomed the FCA’s proposals on Defined Benefit pension transfer advice, saying the new approach will give the regulatory go-ahead for a truly balanced assessment, but has called for it to go a step further and introduce a “pre-advice breakpoint.”

Aegon says a pre-advice breakpoint should be introduced if it becomes clear early on that a transfer would not be in the best interests of the client, saving unnecessary fees.

Steven Cameron, pensions director at Aegon, said: “The FCA proposals clarify and reset expectations around DB transfer advice in a world of DC pension freedoms, and should give advisers confidence to advise their clients in a truly balanced way without excessive caution.

“While more robust, there’s a danger the new approach could take longer, placing upward pressure on advice fees. To counterbalance this, if it’s clear at an early stage that the adviser won’t be recommending a transfer, the FCA should allow a ‘pre-advice breakpoint’. The adviser could save time and their clients unnecessary fees if they can agree early on not to proceed to advice.”

According to Cameron, with many individuals having frozen benefits in more than one Defined Benefit scheme, the FCA should recognise that advisers are well equipped to offer “pick and mix” advice whereby some schemes are left alone while others are transferred.

Aegon said greater regulatory clarity also reduces the justification for Professional Indemnity Insurers to charge extra for those offering Defined Benefit advice.

He added: “Advisers currently face inflated PII premiums if advising on DB transfers. Regulatory clarity should reduce the risks of unsuitable or flawed advice meaning there’s scope for PII premiums to reduce, allowing more cost-effective advice. Together with a pre-advice breakpoint, this could allow more advisers to support more individuals in a market where demand for advice far exceeds supply.”

The consultation on advising on pension transfers closed on Friday 22 September 2017.

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