The City watchdog has identified nearly 60 advice firms who it says should carry out past business reviews on their pension transfer advice.
In a submission to a Work and Pensions committee inquiry on accessing pension savings, published this month (June 17), the Financial Conduct Authority said it had interacted with 104 firms who had given defined benefit transfer advice.
This resulted in 39 variations in permissions and 21 asset retentions whereby firms cannot sell business assets, for example client books, without approval from the regulator.
It also confirmed it is currently undertaking about 30 enforcement investigations and that it had recently commenced High Court proceedings in one case.
The FCA has furthermore identified nearly 60 firms who it considers need to carry out past business reviews.
This was on the back of the FCA’s work to crack down on mis-selling and poor advice in this area.
The FCA told the committee said it had seen “high levels of unsuitable advice” in the past and pointed out that when it reviewed files from the period 2015 to 2019, it found 17 per cent of recommendations to transfer were unsuitable, and only 55 per cent were clearly suitable.
It stated: “While we found some improvement in the quality of advice over time, with 60 per cent of the advice we reviewed from 2018 being reviewed as suitable, the level of suitable advice overall is well below our objective for this market.
"We have intervened extensively to improve the rate of suitable DB transfer advice, both with individual firms and across the sector.”
In 2019 almost 80 per cent of advisers in the defined benefit market were probed about their transfer advice as part of the regulator's crackdown, with the watchdog writing to more than half of the 2,500 advice firms in the sector expressing its concerns.
Earlier this year, data from the FCA showed the number of active firms in the pension transfer market had declined from 2,426 firms in 2015-18 to 1,310 firms in 2018-20.
But there were 103 (6 per cent) new entrants to the market. Overall, the regulator said there were currently 1,521 firms with DB transfer advice permissions.
The City watchdog is expected to continue reviewing firms’ DB advice until at least spring 2022.
In its evidence to the MPs, the FCA also said its recent interventions had focused on the decumulation stage of pensions but it was now focusing on ways in which savers can be supported in the run up to accessing their pension savings.
As part of this, the regulator is looking to introduce a stronger nudge to guidance, which would see providers offer to book Pension Wise appointments for their clients looking to access defined contribution pensions.
As part of this, the FCA has asked the industry whether a nudge to Pension Wise guidance, at an earlier point in the savers’ journey, might be more effective at increasing take up, and how that might work in practice.