How to advise on DB transfers

  • Explain what the FCA expects of advisers offering pensions-transfer advice
  • Identify two main sources of information from the FCA, to help with pension-transfer advice
  • Describe the main points that advisers must consider, to provide pensions-transfer advice
How to advise on DB transfers
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Transfers from defined benefit to defined contribution schemes remains one of the hot topics in pension planning today and a key area of focus for the Financial Conduct Authority.

Two sources of information from the FCA help financial advisers and planners who work in this area to both develop and review their processes: Policy Statement PS20/6 and Finalised Guidance FG21/3. 

This article summarises the main points for financial advisers to consider. 

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Getting ready to give advice

Businesses must hold adequate personal indemnity insurance to give DB pension transfer advice. If companies are offered PI that contains exclusions or limitations they need to consider if these unreasonably limit the cover.

The FCA expects businesses to have good systems, controls, and records, and to gather management information to inform decisions on the type of business they accept, and to fine tune their processes. 

Businesses must create a training and competence scheme. Alongside their usual CPD requirements to remain a regulated adviser, pension transfer specialists must undertake an additional 15 hours each year specifically on DB transfer advice. Five hours must be provided by an external source. 

As the FCA says working with introducers could be an area of high risk, it asks advisers to be very clear with clients about who is responsible for which part of the process.

Initial contact and charging structures

Advisers and planners must disclose charges to clients before they give advice. Charges must be personalised.

Advisers cannot apply contingent charging – where the fee is only paid if the transfer goes ahead – except in certain situations (if the consumer is in serious ill health or serious financial difficulty).

Advisers must charge the same for investment advice on a DB transfer as they would for any other similar sized investment. This is to stop some advisers from backloading the charges from the transfer to the investment.


Providing a triage service is not mandatory. But if advisers do offer this then triage should give the consumer enough information to help them decide whether to proceed to advice.

The adviser cannot give any personalised advice or steer the consumer towards a specific choice. Advisers might want to give consumers written information to read or a web-based education tool, devised by themselves or a third-party triage service. This way the adviser might find it easier to stay distant, and not get drawn into a personal discussion. 

Decision trees or RAG-rated questionnaires cannot be used as part of the triage process. The FCA says as advisers can only make a binary recommendation – to either transfer or not transfer – then these tools carry too high a risk of crossing the advice boundary.

Triage services should give a balanced and unbiased description of the features of both DB and DC schemes, and how the risks and benefits of both compare. 

Information gathering

The adviser must collect enough and the right type of information to know their client. The information must be personal and complete enough to assess suitability; if there are material gaps the adviser cannot make a recommendation.