5th Jun 2020 15:08
(Alliance News) - The UK Financial Conduct Authority on Friday unveiled several measures designed to combat weaknesses across the defined benefit transfer market, as well as reduce conflicts of interest.
One of the measures is a ban on contingent charging, which will remove the conflicts of interest that rise when a financial adviser is only paid if a transfer proceed.
Now advisers must consider an available workplace pension as a receiving scheme for a transfer, or offer an alternative solution as well as reasons why it is suitable.
In addition, the FCA will implement proposals that will allow advisers to provide an abridged advice process which will let consumers access initial advice at a more affordable costs.
Such a process can only lead to a recommendation not to transfer or a statement that it is unclear whether a consumer would benefit from a pension transfer without giving full advice.
The FCA has also conducted targeted supervisory work, looking at advice firms have given to those looking to transfer out of a DB scheme. To this end the UK regulator has conducted in-depth review of the 85 most active firms in the market, responsible for 43% of transfers between 2015 and 2018.
The aim was to identify those firms most likely to be providing unsuitable advice, and found that the number of files where the advice was unsuitable was 17%, which the FCA considers "unacceptably high".
The regulator will undertake 30 enforcement investigations rising from concerns identified in the course of its programme of DB transfer work.
In addition, some of the files reviewed by the FCA includes advice given to members of the British Steel Pension Scheme, where the percentage of unsuitable files was higher than those in the rest of the sample.
The regulator has already taken several actions to help those who transferred out the British Steel Scheme, including writing to almost 4,000 former scheme members advising them how to complain.
One of the companies being investigated in relation to this is Lighthouse Advisory Services Ltd, a subsidiary of financial services firm Quilter PLC.
"The proportion of customers who have been advised to transfer out of their DB pension is unacceptably high. While much of the advice we looked at was suitable, we are still finding too many cases in which transfers were not in the customer's best interests. What we have set out today builds on the work we have been doing and reflects our determination to improve standards in this market," said Interim FCA Chief Executive Christopher Woolward.
By Dayo Laniyan; [email protected]
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