The Financial Conduct Authority (FCA) has said 11 advice firms have started to review their past pensions business after the regulator identified issues in 60 firms.
FTAdviser understands the City watchdog wants all 60 firms to have started their past business reviews before the end of December 2021.
Some reviews have started before others because it is necessary for the FCA to agree with the firms, and where necessary their professional indemnity insurers, the scope of the work which will be undertaken and the review methodology which will be followed.
Reviews also depend on the individual circumstances of the firm. The reviews are a mix of firm-led and section 166 reviews, which are commissioned by the FCA but paid for by the firm.
FTAdviser understands that PI insurers may need to be involved as some policies include conditions which prevent firms from acting without the agreement of the insurer, otherwise the cover will be invalidated.
Therefore the regulator needs to ensure the review can be carried out in a manner the PI insurer agrees with.
In a submission to a Work and Pensions committee inquiry on accessing pension savings, published last month (June 17), the FCA said it had interacted with 104 firms who had given DB transfer advice.
This resulted in 39 variations in permissions and 21 asset retentions whereby firms cannot sell business assets, for example client books, without approval from the regulator.
It also confirmed it is currently undertaking 30 enforcement investigations and that it had recently commenced High Court proceedings in one case.
This was on the back of the FCA’s work to crack down on mis-selling and poor advice in this area.
The FCA told the committee said it had seen “high levels of unsuitable advice” in the past and pointed out that when it reviewed files from the period 2015 to 2019, it found 17 per cent of recommendations to transfer were unsuitable, and only 55 per cent were clearly suitable.
In 2019 almost 80 per cent of advisers in the defined benefit market were probed about their transfer advice as part of the regulator's crackdown, with the watchdog writing to more than half of the 2,500 advice firms in the sector expressing its concerns.
Earlier this year data from the FCA showed the number of active firms in the pension transfer market had declined from 2,426 firms in 2015-18 to 1,310 firms in 2018-20.
But there were 103 (6 per cent) new entrants to the market. Overall, the regulator said there were currently 1,521 firms with DB transfer advice permissions.
The City watchdog is expected to continue reviewing firms’ DB advice until at least spring 2022.
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