In a letter to all firms holding pension transfer permissions dated 16 January, and published on the FCA’s website today (14 February), the regulator’s director of supervision, Megan Butler, said pension transfer advice continued to be a key area of focus at the FCA.
The regulator would be collecting data from all firms who hold the pension transfer permission with a view to assessing practices across the market, she wrote.
Ms Butler wrote: “We have reviewed advice provided by firms active in this area and, as we have publically stated, we are continuing our supervisory work in relation to pension transfer advice.
“Later this year we will also be collecting data from all firms who hold the pension transfer permission with the intention of assessing practices across the entire market to build a national picture.
“We may therefore review in the future any pension transfer advice you have given, or may give.”
Ms Butler warned advisers to steer clear from using a “commoditised approach” to pension transfers after finding it had led to bad outcomes more often than not.
This means advisers cannot rely on generic assumptions when advising on the transfers and have to carry out complete analysis of a client’s personal circumstances or needs to arrive at a personal recommendation.
She wrote: “We are aware that firms offering a commoditised approach to pension transfer advice are more likely to give unsuitable advice or fail to recommend a suitable destination fund.
“Commoditised business models do not adequately focus on the clients’ needs and personal circumstances and can result in a high incidence of unsuitable advice to transfer.
“Our recent work in this area, which is summarised in the October 2017 alert, identified that in only 47 per cent of files reviewed, transfer advice was suitable. This is a serious concern to us, hence our ongoing focus on this area.”
Ms Butler referred to a number of previously published documents for advisers to read, saying she expected advisers to consider these and determine if any changes in their approach are required.
The documents include an alert about accepting business from unregulated introducers, issued in August 2016, a pension transfer alert setting out the FCA’s expectations published in January 2017 and its work on insistent client business as stated in its handbook.
Ms Butler also referred to the FCA’s ongoing pension transfer consultation and its findings from its supervisory work out in October 2017.
The FCA’s focus on DB transfers was sharpened during the British Steel Pension Scheme debacle, which saw steelworkers targeted by unregulated introducers while contemplating what to do with their pensions.
Yesterday (13 February) the chief executive of The Pensions Advisory Service (Tpas), Michelle Cracknell, warned fraudsters were even using social media networks, such as Linkedin, to find the next victims of their pension scams.
carmen.reichman@ft.com
