Defined Benefit  

Regulators told to disclose more DB transfer data

Regulators told to disclose more DB transfer data

The Pensions and Lifetime Savings Association (PLSA) is calling on regulators to disclose more data on defined benefit (DB) transfers, in an attempt to help safeguard against poor practice.

The trade body said it was "vital" the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) collected the right data annually so they can understand the impact DB to defined contribution (DC) transfers were having on consumers.

Tiffany Tsang, policy lead for Local Government Pension Scheme (LGPS) and DB at the PLSA, told FTAdviser: "We need to know if transfers are mainly from savers with small, medium or large transfer values.

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"Prompt action on data collection, and its public release, is needed as potentially ill-advised transfers are happening right now and, in the vast majority of cases, savers will be better off staying in their DB scheme."

FTAdviser reported last month that TPR is asking trustees of troubled schemes to keep a record of pension transfer activity and submit a monthly list of the financial adviser firms used by its members to the FCA.

In a letter sent to trustees of several pension schemes, the pensions watchdog said the level of transfer activity in the pensions industry had increased "significantly" in recent years, therefore electronic records should be maintained.

Paul Gibson, managing director of Granite Financial Planning, agreed more transparency about the number of DB transfers being conducted would be "a good thing".

He said: "The more data that is known and shared can hopefully help prevent poor practice, which has to be in everyone’s best interests."

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

Yesterday (11 September), the regulator revealed it will continue focusing on DB transfer advice until it sees 90 per cent suitability in this area.

The FCA is currently debating whether it should act to ban contingent charging on DB transfers to help achieve better consumer outcomes.

It published a consultation in March where it laid out its views on this practice, with several financial advisers supporting a ban.

Contingent charging means a client only pays for the advice if they go ahead with a transfer, which the FCA said raises the risk of a conflict of interest.

In the case of pension transfers, the adviser won't get paid unless the pension is transferred, which is likely to mean the client giving up valuable benefits including a lifetime of secure income so it may not be in their best interests.

The PLSA is supportive of this idea as a "method of ensuring savers are not being misled".

Ms Tsang said: "We recognise concerns that a ban would make it harder for those with smaller pension transfer values to access advice.

"However, technological advancements may mean that low-cost automated advice might be possible in the future; further guidance should be created by the new Single Financial Guidance Body; and the pensions advice allowance should be revisited to help create more affordable financial advice options."