A shrinking market
Meanwhile, Simon Harrington, senior policy adviser at Pimfa, believes supervision of the market rather than changes to charging structures would have been more effective to improve client outcomes.
He said: “The FCA fervently believes that changing the charging structure for pension transfers will improve the quality of advice given and as a result it seems clear that this hypothesis should be tested.
“We have been clear throughout our engagement with the FCA that the way to identify poor practice and ultimately remove it from the market is through effective supervision which we consider to have been lacking especially in this market.
“One wonders what the response will be a year hence if the quality of advice remains largely the same.”
According to Pimfa, the ban will lead to fewer firms operating in the market with most transfers being carried out by a select number of larger firms.
Mr Harrington added: “Fewer people will access advice as a result of this. The regulator stated as much in its response this morning.
“Conversely, it isn’t immediately clear to us that this will have a significant impact on the PI market.
“There are of course broader, systemic issues in that particular market which need addressing. Of greater concern should be the rise of claims management companies identifying the pensions transfer market as their next business opportunity.”
The FCA believes a better functioning market will lead to shrinking PI costs for advisers.
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