Since the introduction of pensions freedoms in April 2015, consumers have more options available to access their pensions. Furthermore, recent changes in the financial environment have pushed transfer values for Defined Benefits (DB) to historically high levels. These factors have lead to a steady increase in demand for transfers out of DB schemes over the past five years, with the recent impact of Covid exacerbating the situation.
The FCA has identified pensions transfer as an area for concern, It issued a number of documents on 5 June 2020, intended to improve standards. As well as a Guidance Consultation aimed at IFAs, an Advice Checker has been provided for consumers. This sets out a number of issues for investors to consider, regarding the advice process in relation to their transfer. It also explains the process for raising a complaint with the advising firm and a rise in complaints might therefore be expected. The FCA has also directly contacted 7,700 individuals who took transfers from the British Steel Pension Scheme.
From 1 July 2020, all firms holding permission to advise on DB pension transfer were contacted and asked to provide data to help the FCA understand the transfer market. Feedback letters on the information gathered have now been issued. We anticipate that in some instances, past business review may be triggered by this FCA intervention, again increasing the likelihood of redress being required.
Given the increased focus on DB transfer by the FCA – which has a knock-on impact on PI cost and availability, and the removal of contingent charging, there is an industry expectation that a number of firms will exit the pensions transfer advice market. Clearly those advisors remaining in the market will need to ensure that their processes facilitate good quality advice and this may result in fewer upheld complaints in the long term.
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