Hope for pension advisers in new FCA rules

Hope for pension advisers in new FCA rules

The Financial Conduct Authority’s (FCA) policy paper detailing new rules on defined benefit (DB) transfers, to be published this year, is expected to bring back confidence to pension advisers who have shunned the business for fear of a flood of complaints.

Peter Bradshaw, national accounts director at Selectapension, told FTAdviser that advisers are "concerned about regulation around transfer advice and await greater clarity on the guidance provided by the FCA".

He said: "As a result, many have expressed reluctance to get involved in providing advice on DB transfers."

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After the introduction of pension freedoms in 2015, the volume of defined benefit pension transfers has been soaring, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into defined contribution (DC) schemes in order to access their cash.

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

Figures published by pension administration firm Mercer in April showed as much as £50bn has been pulled from final salary pension schemes in the past two years.

Meanwhile HM Revenue & Customs data showed more than £14bn have been unlocked from defined contribution pensions since pension freedoms came into effect.

According to Mr Bradshaw, Selectapension processed more than 94,000 DB transfer value analysis report (TVAS) cases from January to the end of November 2017, highlighting the continued public demand.

He said: "However, frustratingly, many advice firms are still struggling to meet this demand, having been mugged by the time taken to fully complete transfers."

Part of the problem, according to Mr Bradshaw, is the time these processes take to be completed, with some cases taking around 33 weeks.

He said: "Greater understanding of the needs and requirements between advice firms and scheme administrators is vital to speed up this process.

"A code of practice would be very useful, and easy access to scheme information, maybe on a designated website, would also be helpful."

FTAdviser reported in August that The Pensions Regulator (TPR) is currently working with industry representatives to draw up a template to be filled by pension administrators when they are asked for a DB transfer value.

If such code is created, "not only could process times be greatly reduced, but advisers would be in a much better position to handle the growing demand," which will continue to rise throughout 2018, Mr Bradshaw argued.

He added: "In order to avoid cliff edge decisions, it would be beneficial to DB scheme members if all schemes offered partial transfers, allowing members some financial control without the fear of fully committing to one option only."