Webb: Right for FCA to update pension transfer rules

Webb: Right for FCA to update pension transfer rules

Former pensions minister Sir Steve Webb has expressed concern about over regulation of the defined benefit transfer market.

Speaking at a DB pensions transfer conference today (19 June) the former Lib Dem minister said: "If you are the FCA and you wrote the regulations for one world and things change fundamentally, of course that's not going to fit very well so it is right that the regulations be updated.

"Any fool can say this will be a scandal: if it isn't a scandal people will forget and if it is a scandal you look wise.

"Very few people condemn a regulator for blocking perfectly good transfers that would have been in people's interests because it is a counterfactual.

"Regulators are subject to a behavioural bias which is to over regulate."

The FCA is currently looking into the DB transfer market, as the volume of transfer requests has raised concern among the regulator and financial advisers.

Pension transfers have soared since the introduction of pension freedoms in April 2015 - as DB scheme members rushed to transfer into defined contribution schemes to take advantage of the new rules to gain access to their entire pension pot.

Demand has also been led by steep rises in transfer values, sent higher by record low gilt yields, which have tumbled particularly since last year's Brexit vote.

But Sir Steve said there was a downside risk to stopping some people from transferring as well as allowing others to transfer.

He said it was "paternalistic" for the industry to claim it knows best what people should do with their pensions.

Sir Steve said: "Saying someone made the wrong choice means knowing what they wanted."

He said he was particularly concerned about the prospect of the regulator toughening up it's presumption that DB transfers shouldn't go ahead.

Sir Steve also pointed to Royal London research which showed the number of DB transfers has gone up by 50 per cent recently.

Based on figures from The Pensions Regulator he said this meant that this year there would be 120,000 such transfers.