Pensions  

FCA stops five more firms doing pension transfers

FCA stops five more firms doing pension transfers

Another five firms entered into voluntary agreements with the Financial Conduct Authority to stop carrying out pension transfers in the first half of this year.

This has brought the total number of firms which the FCA has taken this action against to 21 in the past 18 months.

According to data released under freedom of information rules, the FCA entered into voluntary agreements with three advice firms, banning them from providing advice on pension transfers from defined benefit pension schemes, which have generous terms and provide an income for life, to defined contribution schemes, which have no such protections.

It entered into similar agreements with another two firms banning them from carrying out any regulated activity.

Last month former FCA technical specialist Rory Percival estimated that the regulator looked at between 50 to 100 firms as part of a study it had carried out into firms which conduct pension transfer business.

Advice firms carrying out pension transfers have been in the regulator's sights for several months.

On Monday (31 July) the FCA banned another firm from carrying out pension transfers.

It told David Williams IFA to “immediately cease to provide advice in relation to the transfer, or conversation, of safeguarded benefits under a pension scheme to flexible benefits”.

In June the FCA told Strategic Wealth UK to stop all pension-related business until a review was completed.

Phil Deeks, technical director at TCC, said: "The rising number of firms ceasing to carry out defined benefit pensions transfers under a ‘voluntary agreement’ following a review by the FCA is indicative of a firm that is arguably focused on profits to the detriment of customers.

"We know that some firms had developed propositions to take advantage of the increased demand and are based purely on the regulatory perimeter rather than a proposition that is designed with the needs of customers in mind.

"In our experience, this comes back to the culture. Firms with a customer-centric culture will design and deliver propositions that provide good customer outcomes supported by appropriately robust systems and controls to ensure that the advice provided to customer is done with a holistic appreciation of their circumstances."

There has been a large increase in demand for DB transfers driven by transfer values which have been soaring in the 10 months since the EU referendum thanks to plummeting gilt yields.

The introduction of pension freedoms in 2015 has also led to a huge increase in transfers, as over 55s seek to tap into their full cash fund, something only available to defined benefit scheme members once they have switched to a defined contribution scheme.

According to Xafinity's most recent figures, average transfer values now stand at around £232,000 for a pension worth £10,000 a year at age 65.

That's more than £20,000 more than the same pension was worth on 1 June 2016, before the UK voted to leave the European Union.

Phil Young, managing director of Threesixty Services, said: "It seems to be the outsource firms who are bearing the brunt of it as they are the ones who've taken responsibility for advice rather than the advice firms who've handed clients across.