Defined Benefit 

The FCA has pension transfer changes in sight

“At Aviva, we won’t take a customer who has not received advice. If a customer who has got less than £30,000 in a DB scheme wants to transfer to us without advice we won’t take the transfer value.

“That’s because people are self-advising in a complex area and £30,000 could be a lot of money to them and more than likely they may have got the advice wrong and we might end up with financial and reputational risk.”

This issue, according to some pension experts, creates an opportunity for large banks and providers to fill a gap by offering some sort of online service, which they might be better placed to do because of their economies of scale. Mr Brown said: “The requirement to take advice if a pension pot is worth more than £30,000 ensures a level of protection for consumers, however those below this level lack the support they need to make the right decision.

“[We] welcomed the Work and Pensions committee’s recommendations on default guidance at the point of retirement. This is something we have long called for, arguing that consumers need a shove, not a nudge, to ensure they have support to get the most from their hard-earned savings.

“If this recommendation was introduced alongside strong action to increase the numbers taking advice, many more people would be able to get the right outcomes at retirement.”

Driving behaviour

The way information is presented to the client during the DB transfer process is also driving the wrong behaviour.

Mr Brown wants the FCA to go beyond just changing how transfer values are presented visually on paper, to looking at the sequence of the advice process and how conversations about transfers are framed with consumers.

He added: “There is a very real possibility that if someone sees their transfer value before hearing the risks, they will be unduly swayed by the big number and will pay less attention to what they would be foregoing.

“We believe all the risks of transferring should be fully presented at the start of the conversation so that when a member sees their transfer value they are more informed and can better understand what they would be giving up.

“This means a change in behaviour at trustee level, as well as adviser, and both the FCA and The Pensions Regulator will need to be in agreement on the best approach.”

The lack of a joined-up approach between the adviser and the transfer specialist also means that information is falling through the cracks and customers are at risk of not being advised properly.

Mr Lawson said: “You really have to view it as one piece of advice. What the IFA should be saying to the transfer specialist is once you have done the transfer value analysis service (TVAS) report, let’s spend an hour or half and hour discussing that and whether that matches the client’s attitude to risk.