PensionsAug 22 2017

FCA urged to rule faster on pension transfers

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FCA urged to rule faster on pension transfers
ByMaria Espadinha

Aegon’s public affairs director is urging the Financial Conduct Authority (FCA) to rule as soon as possible on defined benefit (DB) transfers, as a way to make advisers more comfortable when dealing with client requests.

“Advisers should be able to have much more confidence in FCA rules,” Steve Cameron told FTAdviser.

At the moment, advisers feel that there is a lack of guidance from the regulator in this matter.

DB transfers have been soaring, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into defined contribution schemes in order to access them via the pension freedom rules.

However, many in the industry, across both advisers and providers, are concerned about the suitability of such a high volume of transfers, and liability if clients later complain.

“These professionals are not confident on giving advice on DB transfers, and I understand why they are cautious,” Mr Cameron said.

At the start of the year, the FCA expressed concern about the processes advice firms were using when recommending DB pension transfers.

The regulator published a paper on this matter in June, when it opened a consultation, which will close on 21 September.

A policy statement is expected to be published in the first quarter of 2018.

This means that it will take several months before advisers are told “what the direction of travel is,” said Mr Cameron.

This is not the first time Aegon has pressed the FCA on the issue.

Adrian Grace, chief executive of Aegon UK, has previously expressed concern that advice businesses could be under threat if the regulator fails to clarify the pension transfer rules soon.

Pension freedoms, introduced in 2015, has seen hundreds of thousands of individuals in a defined benefit pension scheme move a defined contribution scheme so they can access their full pension pot in one go, rather than receive a guaranteed income for life as is normal practice for DB schemes.

However, savers have to employ the services of a financial adviser if they have more than £30,000 in their defined benefit pot.

The Financial Conduct Authority is currently carrying out a desk-based study into advice firms doing a “significant” amount of defined benefit transfer business.

Among the concerns the regulator is believed to have is the conflicts of interest involved in the process.

The work is understood to not be a formal review or study but is a piece of supervisory work in which the FCA is looking at advice firms which have increased the number of DB transfers they have been doing.

This work could be one of the reasons why a number of advice firms have found themselves having to stop carrying out pension transfers.