The APTA has to look forward. The FCA has woken up to the fact that taking a transfer value is not a point in time decision. It is a commitment to a new way of life, underpinned by an investment and income withdrawal strategy, both of which will require monitoring over time. The APTA must bring both of these into play.
Communication aspects are clearly going to be tricky. The TVC will be conveying a clear ‘don’t do it message’. But it is housed within an over-arching APTA that may say: "We’ve identified your personal needs and found that transferring to DC is the best way of meeting them." Whatever you do, do not take the short-cut favoured by lazy advisers of saying: "This bit is only included to keep the regulator happy".
Successful advisers will be able to show clients how moving to the much more flexible structure of DC enables the large quantum of wealth tied up in their pension to be deployed in a better manner than the DB scheme was going to. Two further changes will make life more expensive for advisers.
Firstly, TVC and APTA software suites can no longer be given away to advisers free of charge as software is now classified as an inducement. Already we are seeing major players like Standard Life pulling the plug on free TVA software well ahead of the 1 October changes. The FCA found some evidence it did not like in its review that providers were offering TVA tools free on the condition that any subsequent transfer business done using their tool needs to be done through them.
Secondly, advisers must consider the client’s workplace DC scheme as a potential home for the transfer value. Many workplace schemes accept transfers and often offer exceedingly low charges, negotiated with providers on grounds of scale. However, these policies are unlikely to facilitate adviser charging in the way that a Sipp or platform can. Apparently this has always been a requirement, but the FCA has now spelled it out as not all advisers were giving consideration to workplace schemes.
Stiffening of the DB to DC transfers regime comes at a price. The FCA reckons the bill for making the changes amounts to between £6.5m and £8.13m a year to market participants, and their cost benefit analysis expects this to be passed on to consumers, who will benefit from the improved advice the new regime heralds.
