The FCA is keeping pressure on advisers to drive up the suitability of their defined benefit transfer advice, as it warned that too many firms were providing advice that was “not of an acceptable standard.”
The regulator said it was concerned that large numbers of clients had been recommended to transfer out of their DB pension, despite its position that transfers are unlikely to be suitable for most people. The findings revealed that between April 2015 and September 2018, 69% of the 234,951 DB members seeking advice had been told to transfer. Of the 2,426 firms providing transfer advice, 60% had recommended three quarters or more of their clients to transfer.
The total value of DB pensions where transfer advice had been given totaled £82.8bn, with an average value of £352,303.
Megan Butler, executive director of supervision, wholesale and specialists, FCA, said: “We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable. It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.
‘Deciding whether to transfer out of a DB scheme is one of the most complex financial decisions a consumer may have to make and it is vital customers get high quality advice. Our ambition is for pension transfer advice to reach the same standard as that of the rest of the financial advice market.’
In its last update published in December 2018 the regulator found advice was suitable in less than 50% of cases. This compares to the wider financial advice market, where advice was found to be suitable in around 90% of cases.
Going forwards, the FCA said it will be directly assessing the firms most active in the market throughout the remainder of the year and writing to all firms where it has identified “potential harm” in their advice.
