Defined BenefitJun 25 2019

PFS dismisses impact of FCA pension transfer data

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PFS dismisses impact of FCA pension transfer data
ByMaria Espadinha

The Personal Finance Society does not believe the pension transfer data released by the Financial Conduct Authority last week would have a great impact on the industry, saying it was not representative of broad advice standards.

Keith Richards, PFS chief executive, said it was vital to understand that the FCA’s study was narrowly focused on defined benefit transfers, and did not include or represent the activities of all regulated firms.

The regulator published last week (June 19) the results of its survey of 3,015 firms between April 2015 and September 2018, concluding that too much of the advice on DB transfers it has seen was "still not of an acceptable standard".

It also voiced concern about the volumes of recommendations, with 69 per cent of clients having been recommended to transfer.

The watchdog found the average transfer advice value was £352,303, equivalent to a total value advised on of £82.8bn. This included both actual transfers and advice against it.

The FCA is concerned that firms are recommending that large numbers of consumers transfer out of their DB pension schemes, despite its stance that transfers are likely to be unsuitable for most clients.

Mr Richards said: "It is logical that the FCA will hone their focus on risk-based supervision targeting businesses where there is volume activity, and therefore the potential for greater risk to consumers if pension transfer advice processes are found wanting.

"This study is therefore not representative of the wider financial advice community, many of whom don’t advise on defined benefit transfers and those who do in the main may have only advised on a small number of cases to meet the needs of existing clients."

Mr Richards, who has discussed the results with the regulator, added that it’s important "that reporting of failings is proportionate and does not misrepresent the majority or erode public trust more broadly".

He added: "It is equally important that the profession and professional indemnity insurers do not over-react to this latest FCA data, and automatically think there is a widespread problem with the DB transfer advice being given by the entire financial advice profession.

"Professionalism is evident as demonstrated by past FCA reviews and there are hundreds of PFS members who have signed up to the Pensions Transfer Gold Standard."

The gold standard badge and guide is an initiative brought to life by the Pensions Advice Taskforce, a group set up by the PFS to increase consumer awareness and protection in areas of complex pension advice.

It includes a consumer guide on good advice and states that firms must help clients understand when advice is appropriate.

FTAdviser reported in May that more than 600 firms have already signed up for the quality mark.