About seven in 10 pension transfer specialists say they have been put off providing this service by the complexity of Financial Conduct Authority regulations, new research has found.
Pension provider Aegon, which polled 211 IFAs in April, stated that many advisers are concerned that the regulations may not be completely clear and could be subject to different future interpretations.
This is due to the fact that despite the FCA introducing new rules for advisers in the pension transfer market in October, such as the requirement for advisers to undertake an appropriate pension transfer analysis, the watchdog issued a "strongly worded update" to this market in December, Aegon noted.
At the time, the FCA said it was "very concerned" that too many firms are not consistently providing suitable advice on pension transfers, after finding less than 50 per cent of the advice it had reviewed was suitable.
The provider noted that the feedback it received from advisers was that they want to be more confident that the advice they provide is "fully in line with the regulator’s expectations and won’t leave them open to any retrospective challenges".
Misgivings about regulatory interpretations are having an impact on the DB advice market, Aegon stated, with three quarters (75 per cent) of advisers saying it isn’t currently working as well as it could be in meeting the needs of consumers.
If this share of the market drop their permissions this could lead to a serious shortage of options available for consumers.
According to Steven Cameron, pensions director at Aegon, everyone accepts that advice on defined benefits is a highly complex area.
However, where consensus is harder to reach is exactly how the FCA’s updated regulations and suitability review comments should be interpreted, he noted.
He said: "Previous and ongoing reviews of suitability from the FCA shows DB advice remains under intense regulatory scrutiny. FCA strongly worded feedback provides further detail on ongoing weaknesses with some firms’ advice.
"Advisers clearly want as much regulatory certainty as possible and while regulations and updates are helpful, the greater the volume, the more complex it can be to be confident in interpretation."
Mr Cameron noted that while the provider believes most people will be better off staying in their DB scheme, "it is imperative that those wishing to review their options have access to advice".
He added: "This means any further reduction in the supply of advice will be to the detriment of consumers."
Paul Stocks, financial services director at Dobson & Hodge, said: "The principle that members will be better off financially in a DB scheme remains our stance and is the start of any advice we give.
"Guidance from the FCA is useful in so far as it confirms the nature of our advice process. However, it is the broader issues which are a concern (e.g. future restrictions on PI).
"Having said that, having regulatory focus on this area should help ensure the profession approaches this complicated aspect of advice and planning appropriately."