Defined Benefit  

FCA action on DB could kill off ongoing fees

From October 1, advisers cannot charge for advice on this basis, save in certain exceptional circumstances, and clients will have to pay whether they go ahead with the transfer or not.

Some industry figures said the move could lead to companies pulling out of the market, making it harder for clients to access transfer advice.

But others welcomed the decision, saying it would remove conflict of interest concerns and stop unscrupulous advisers pushing ahead with a transfer when it is not in a client’s best interest.

Fiona Tait, technical director at Intelligent Pensions, said the ban will help companies to clearly outline the services on offer to clients and make it clear what they are paying for.

Ms Tait said: “Contingent charging presents a significant conflict of interest and that it also devalued the worth of the advice process itself as opposed to simply facilitating a product transaction.

“We are, however, disappointed to see that implementation fees are still covered by the ban, as we currently offset this charge for transfer clients in recognition of the fee already paid and will as a consequence have to discontinue this practice.”

Previous campaigns

The FCA’s crackdown on DB transfer advice, and the subsequent ban, is the result of a long-running campaign by groups such as the Work and Pensions Committee and British Steel Pension Scheme members.

The WPC consistently argued advisers could be incentivised to give bad advice when using a contingent charging fee structure and launched its own inquiry into the matter in January 2019.

The question of poor DB advice was thrust into the spotlight by the British Steel debacle, in which thousands were misled into transferring out of their DB scheme.

The FCA announced last week it would write directly to around 7,700 former members of BSPS to invite them to revisit the advice they received, and complain if they had concerns.

Philippa Hann, partner at Clarke Willmott, who has been helping steelworkers bring claims against advisers, said she welcomed the FCA’s intervention.

The FCA has been approached for comment.

amy.austin@ft.com, rachel.mortimer@ft.com

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