Emma Ann Hughes 

FCA right to widen net on pension transfer failures

Emma Ann Hughes

Emma Ann Hughes

The way pension transfers are being handled for some steel workers proves the Financial Conduct Authority is right to continue to investigate this area.

Earlier this week, Megan Butler, executive director of supervision for the investment wholesale and specialists division at the Financial Conduct Authority (FCA), revealed how the watchdog would continue to probe pension transfer specialists.

Over the past two years, the FCA has done detailed data collections of firms most active in the pension transfer area and visited a dozen firms.

These visits, alongside data requests, found advice in more than half of defined benefit pension (DB) transfers where the recommendation was to move the retirement pot was unsuitable or unclear.

From a total of 88 DB transfers analysed by the watchdog since October 2015, only 47 per cent were suitable.

The regulator found that 17 per cent were unsuitable and in the remaining 36 per cent suitability was unclear.

The visits also resulted in four businesses no longer advising on pension transfers.

Speaking at the Personal Investment Management & Financial Advice Association (Pimfa) annual summit, Ms Butler said the root cause of a lot of these issues related to the business model in this area between the introducing firm and the transfer specialist.

She said this business model was becoming “industrialised” and “commoditised” rather than focusing on the individual client’s needs.

She said the FCA will now take what has been done with the smaller group and roll this work out to "the wider group also active in the area" of pension transfers.

As well as checking what is going on in the wider pension transfer industry, Ms Butler added the regulator is still actively considering “what more can be done in this area across the broader population”.

More clearly does need to be done if the FCA is to protect consumer's finances from themselves.

Despite the number of pension transfer specialists shutting up shop this year and the FCA’s repeated comments about what it expects in this area, some advisers are continuing to just permit a transfer because it is what the client wants rather than what they need.

Yesterday (9 November) FTAdviser reported pensions expert and founder of Pension Playpen Henry Tapper had seen little evidence of financial advisers suggesting anything other than transfers to members of the British Steel Pension Scheme (BSPS).

Mr Tapper and Al Rush, principal at Rutland-based Echelon Wealthcare, spent Wednesday (8 November) at Port Talbot in Wales speaking to defined benefit (DB) scheme members.

Around 130,000 individuals will have to choose to move their pension pots to a new plan being created, BSPS II, or stay in the current fund, which will be moved to the Pension Protection Fund (PPF).

In August, Tata Steel UK (TSUK) got the go-ahead to offload BSPS and create a new defined benefit fund.