FCA targets 90% suitability for DB transfers

FCA targets 90% suitability for DB transfers

The Financial Conduct Authority has said it will continue focusing on defined benefit transfer advice until it sees 90 per cent suitability in this area.

Last year, as part of its suitability review, the FCA found only 47 per cent of the DB transfer cases it analysed were suitable, with 36 per cent being "unclear".

This compares to the 90 per cent suitability the FCA found in the pensions accumulation advice market and 91 per cent in the retirement income advice market.

Speaking after the FCA's annual public meeting today (11 September), Megan Butler, the regulator's director of wholesale supervision, said: "This has been a key part of our supervisory work and it will continue to be until we see standards improve from the level we have previously found.

"We will carry on this work until that statistic is much closer to what we have seen more broadly in this sector, which is around 90 per cent broadly suitable."

Earlier this year the FCA revealed it would be collecting data from all financial advice firms which hold pension transfer permissions as part of the latest stage of its suitability review, but Ms Butler said this process had not started yet, and the regulator was still "scoping" what it should be looking for.

She said: "This is an area we have been working in for a couple of years now. We have had three rounds of assessment and testing across the quality of advice in this area and we are now moving into a fourth round.

"Those three have been on a sampled basis but in the fourth round we are gathering data from the 3,000 advisers that work in this area so we make sure we are extrapolating properly our conclusions across this sector."

She added: "Alongside that we are gaining more and more intelligence around firms who might be engaging in activity that causes harm. A lot of that intelligence comes from other advisers and members of the public."

Ms Butler said the increasing media coverage of DB transfers had helped the FCA tackle the issue, with the intelligence it receives proving increasingly useful.