Disappointment and delight: industry responds to FCA delay of DB rules

The regulator was set to publish its final policy statement on reforms to the defined benefit pension transfer market, including proposals to ban contingent charging, in the first quarter of this year. 

But with one week remaining to meet this deadline the FCA delayed its timeframe, with a policy statement now expected in the second or third quarter of 2020.  

This means changes to rules surrounding pension transfer advice could be delayed by up to six months. 

It comes as the watchdog moves to shed all "non-critical" work in the face of the coronavirus pandemic, including its guidance on vulnerable clients. 

Steven Cameron, pensions director at Aegon, welcomed the regulator's decision to delay its policy statement. 

Mr Cameron said: "In these unprecedented times, people need advice more than ever and a contingent charge ban, leaving individuals no choice but to pay upfront for advice, would have made it more difficult for some individuals to access advice on defined benefit transfers.

"The FCA had proposed a carve out from the ban for those in significant financial hardship, but in the current climate it would have been even harder to objectively assess whether an individual met that definition."

When it first proposed the ban last year, the FCA said consumers suffering from serious ill-health or experiencing serious financial hardship would be excluded from the measures.

In the minority of cases 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. 

Simon Harrington, senior policy adviser at Pimfa, said the FCA's move to delay its final decision came as "no surprise". 

Mr Harrington said: "There are far more pressing considerations in the market right now – specifically how certain businesses even stay afloat – than the introduction of measures which we still maintain will have little to no bearing on the quality of pension transfer advice.

"We have called for them to show regulatory forbearance and the decision to delay the publication of any policy statements are consistent with this.

"This is in keeping with a regulator who is willing to listen and it is something which we welcome."

The trade body last week asked the financial watchdog to show "regulatory forbearance" during what it branded "extraordinary times". 

Keith Richards, chief executive at the Personal Finance Society, said the professional body welcomed the FCA's deferral. 

Mr Richards said: "At this time of economic and social difficulty facing the entire country it is logical that all non-essential policy change or deadlines are postponed until Covid-19 is contained and we can reflect on our experience."

But Clive Harrison, partner at pensions consultants LCP, said delays to pension transfer rules could jeopardise pension scheme members in the current coronavirus lockdown and associated market turmoil.   

Mr Harrison said: "The defined benefit advice market is very diverse with a mix of high quality advice sitting alongside cases where the FCA finds that members have clearly been given unsuitable advice. 

"If the FCA believes that the consumer detriment from poor quality advice runs into billions of pounds, it is very disappointing that measures designed to improve the advice market have been delayed. 

"Given the particular concerns in the current Covid-19 environment about pension scheme members being vulnerable to scammers, and poor quality advisers taking advantage of members’ fears, it is vital that consumer protection measures are maintained as far as possible, despite the present situation."

rachel.mortimer@ft.com 

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