The Financial Conduct Authority has issued a fresh warning to advisers giving bad pension transfer advice, saying it stands ready to take action against them.
In its business plan for 2018/19, published today (9 April), the regulator revealed it is planning a 4.2 per cent increase in adviser fees for the new financial year, and laid out its priorities for supervision and regulation.
Under what it terms its ‘key activities’ in the area of long term savings, pensions and ‘intergenerational differences’, the FCA flagged unsuitable pension transfer advice in the wake of 2015 pension freedoms.
“Some firms have responded to the pension reforms by changing their business models in ways that potentially cause harm to consumers,” it stated.
“We will not hesitate to intervene, where necessary, if we see evidence of firms providing unsuitable pension transfer advice,” it warned.
The FCA is currently collecting data from all firms with pension transfer permissions to assess practices across the entire market, and identify the extent of consumer harm and where and how it can intervene most effectively to stop it.
It is also eyeing a ban on advisers using contingent charging for pension transfer advice on the grounds advisers' only getting paid if a transfer takes place creates an inherent conflict of interest that could harm pensioners.
FCA chief Andrew Bailey said the shift to consumers having to take more responsibility for their financial choices has “coincided with increasingly complex needs”, as clearly illustrated in the retirement income savings and pension market.
“In the past year, we have been extremely concerned about some firms exploiting consumers’ lack of knowledge of pension products when advising them to transfer out of defined benefit schemes,” he said.
However the business plan also reflected the difficulty the regulator will have in balancing the many demands on its budget and people with the crucial role of UK financial services in ongoing Brexit negotiations.
Mr Bailey stated the plan “priorities reflect the high level of resource we need to dedicate to EU withdrawal”.
“This inevitably affects the amount of work we can undertake in other areas. As a result, agreeing our 2018/19 priorities has involved particularly rigorous scrutiny and challenge,” he said.
But he added the UK’s withdrawal from the EU “makes it even more important that UK markets remain visibly clean, fair and reliable”, suggesting the EU talks with not derail the FCA’s supervision role.