Damian Fantato 

Winter is coming for contingent charging

Damian Fantato

Damian Fantato

Regardless of whether you watch the recently ended TV series Game of Thrones, the oft-repeated phrase ‘winter is coming’ has seeped into popular culture.

Fear not, there will be no spoilers here, but the phrase highlights a certain grim inevitability of a looming threat that pervades the series.

Perhaps this is the attitude advisers should take towards a ban on contingent charging for defined benefit transfers – the practice of advisers only being paid for their services if they recommend a transfer.

We have now learnt that Frank Field, the chairman of the Work and Pensions Committee, plans to bring forward legislation to ban contingent charging if the Financial Conduct Authority refuses to act.

Mr Field and his committee have made their views on contingent charging plain: when it published its review into the British Steel Pension Scheme debacle in early 2018 it identified this practice as a “key driver of poor advice”.

The FCA politely disagreed, saying the issue was more complex, but the regulator has found itself having to review the issue yet again after sustained pressure from Mr Field.

There are certainly arguments on both sides: it is true there is something about contingent charging that fails the smell test and it is easy to see why the public might be suspicious.

But on the other hand, without contingent charging many would be unable to afford advice.

Like with many aspects of the sorry tale of the BSPS, bad advisers cause problems for the good ones.

Reading the runes, it seems a contingent charging ban is more likely than not and advisers should probably prepare themselves for this eventuality.

As far as contingent charging is concerned, winter is coming.

damian.fantato@ft.com