Nucleus has warned the rules proposed by the Financial Conduct Authority for defined benefit pension transfers could reduce access to advice for many.
In an article published yesterday (August 27), Jon Gwinnett, product technical manager at Nucleus, wrote while the FCA's plans seemed reasonable, he was concerned about a "push to drive down the demand for pension transfer advice”.
He warned the FCA's "optimism" about the effect of its policies could be "misplaced" and that there was a "clear risk that removing the option of contingent charging, for all but a minority of cases, will lead to fewer consumers being willing or able to meet the cost of advice.”
The FCA said in its latest paper it expects its proposals to reduce consumer demand for DB pension transfer advice by between 56 per cent and 66 per cent per year, "the range depending on how many consumers are willing and able to pay for advice".
Mr Gwinnett said: “This will be a key measure in terms of both improving client outcomes and in predicting the effects the changes may have on the advice market.”
The FCA proposed to ban contingent charging in all but a few pension transfer scenarios in July, having previously refrained from interfering in this space.
Exceptional scenarios will include specific groups of consumers with certain identifiable circumstances, such as individuals suffering from serious ill-health or experiencing serious financial hardship.
But where contingent charging is permitted, advice firms will have to charge the same amount, in monetary terms, for advice to transfer as they charge when the advice is non-contingent.
The regulator had changed its mind over concerns the practice was leading advisers to tell more people to transfer than might have been fit.
Mr Gwinnett said he'd always thought in most cases transferring a DB pension was unlikely to be in the member’s best interest, as was the FCA's stance, but that there were instances where people had compelling reasons to transfer out.
Mr Gwinnett questioned the regulator's findings in its DB transfer advice review that about half of transfer advice given was unsuitable, saying the figures were based on targeted reviews.
He added: “If I investigate fraudsters, it’s likely I will find that fraud is commonplace. This doesn’t necessarily mean that fraud is commonplace - it means it's commonplace in that group.
“The FCA has a very valid core message. But I worry the regulator risks diluting that and tarring everyone with the same brush when it concludes that because high risk firms advise on unsuitable transfers, everyone else must be doing the same.”
Mr Gwinnett concluded there may be opportunities to enhance advisers' damaged reputation in the sector, and the new abridged advice process – another of the FCA's proposals – “may make it easier to focus on the cases that will benefit most from full advice”.
“But it remains to be seen if the risk of further limiting access to advice had been completely addressed,” he noted.