Q: What is the latest from the Financial Conduct Authority on defined benefit transfers?
A. As it happens, not a lot. But there was, however, an interesting report recently published by the Complaints Commissioner.
The complaint in question related to a company not being able to obtain compliant professional indemnity insurance terms and then subsequently receiving an instruction by the FCA to voluntarily remove their full pension transfer permission.
After the commissioner investigated the complaint, they concluded the FCA acted within their powers and did not uphold the complaint.
It is always regrettable when the FCA takes the decision to request a company give up its DB transfer permission, through no fault of the company or its advisers.
In this case, the FCA permitted the IFA to conclude some pending transfers.
This is a rare occurrence and, if you find yourself in a similar position and wish to negotiate the conclusion of cases where no PII cover is held, you need to be mindful of your responsibilities of the broader risks associated with this decision.
Perhaps the most interesting statements made by the commissioner appeared at the end of their report: “I have also suggested that the FCA considers, in the context of its work on DB transfers and the PII market, the concerns raised by you about the impact of the shrinking PII market and withdrawal of cover from reputable, professional firms such as yours.
“This is clearly a serious issue, causing problems for clients, firms, and the regulator.
“The FCA has told me about its continuing work in this area. It intends to publish its findings in due course.”
There will be no let-up in the FCA’s review of companies advising on DB transfers.
It is right that it identifies – and removes – any company not providing good outcomes to its clients, but that should not be at the expense of removing the DB transfer permission of companies running compliant businesses that are in the situation of not being offered fully compliant PII terms.
The FCA has written to many asking them to voluntarily withdraw their DB permissions, without a proper assessment of the risk or benefit these companies offer to consumers.
At the same time, PI insurers have continued to reduce their capacity in this area and that is a continuing trend.
If you find yourself in the position of having to voluntarily remove your DB transfer permission, please make sure you do so in the correct way so that you do not lose the limited transfer permission also.
Richard Nuttall is director of compliance policy atThe SimplyBiz Group