The regulator could be forced to take a harder line on pension transfer advice if problems persist, Rory Percival has said.
The former Financial Conduct Authority (FCA) technical specialist said it was unlikely the regulator would do more thematic work following its coming round of reviews.
Speaking at the Curtis Banks roadshow in London today (28 February) he said persistent failings in the market could lead to a formal pension review but he believed the regulator would want to avoid that.
Mr Percival (pictured) said: "The FCA is already in their third round of thematic supervision [of defined benefit (DB) transfers] and they have announced they are doing a fourth round later in the year.
"A thought that occurred to me recently was if they get to the end of a fourth round of supervision and they are getting similar kinds of results what do they do then?
"They will need to do something else at that stage, they can’t just keep doing more thematic work finding the same sorts of results."
Mr Percival, now a consultant, added: "I don’t know what that is and they’ll probably bust a gut for it not to be a formal pensions review like we’ve had before. But if the results continue to be very poor what happens next?"
In its latest work in October it found a mere 47 per cent of DB transfers had been suitable, while 17 per cent were unclear.
Mr Percival said: "Don’t think 'unclears' are some minor record keeping issue, 'unclears' are fails. Failing to demonstrate suitability is a rule breach."
In response to its findings the regulator asked several firms to alter their pension transfer permissions, which means they have been asked to stop giving DB transfer advice on a voluntary basis.
Mr Percival warned advisers should not underestimate the significance of such regulatory intervention, despite the voluntary element.
At the regulator he worked in supervision for eight years and never recommended a variation of permissions at any firm, though he had sent firms to enforcement and recommended section 166 reviews.
He said: "If you switch off an income stream at a firm you have the risk that the firm becomes insolvent."
One firm suffering the consequences of a variation of permissions was Active Wealth, a firm embroiled in the British Steel Pension Scheme debacle which went into liquidation in mid-February.
But Mr Percival also warned against being under-cautious. Firms should actively recommend a transfer where it’s the right thing to do, he said.
To guard against regulatory intervention, Mr Percival pointed to "one single most important factor", which was to add detail to the client file.
He said he had timed his exit from the regulator 16 months ago so he could learn from the some 1,100 files the FCA had reviewed as part of its suitability probe.