If the client decides to continue to full advice, the adviser must offset the cost of the abridged advice against the cost of the full advice. Before the adviser can implement any transfer, the client must have gone through the full advice process.
If the personal recommendation is not to transfer, then the process usually stops. The client could go on to seek full advice, but the FCA would expect in most cases the outcome from full advice would be a recommendation to not transfer.
Advisers do not have to offer abridged advice, but if they do it has to be carried out or checked by a pension transfer specialist.
The guidance states businesses should consider the risks of staying in the scheme and the risks of transferring and losing benefits. It can use an estimated transfer value. However, a transfer value comparator (TVC) or an appropriate pension transfer analysis (APTA) cannot be included, and the business cannot consider the consumer’s proposed receiving scheme.
Full advice process – research and analysis
Advisers need to provide both a TVC and an APTA as part of their full advice process.
The TVC compares the transfer value to the cost of buying DB scheme benefits in a DC scheme. It must be prepared and explained so the consumer understands the inherent value in the DB scheme.
The APTA is the research and analysis used to determine a suitable course of action. It cannot be generic; it must demonstrate the client’s personal circumstances. The FCA makes clear it does not expect generic reasons for transferring, such as greater flexibility or better death benefits, to be the drivers for a transfer. It should also consider alternatives to transfer.
Businesses may want to include cash flow modelling as part of the APTA looking at specific income and spending plans. It should probably go beyond average life expectancy – for example up to 100 years old.
The APTA can cover scheme solvency, but businesses are warned not to misrepresent the Pension Protection Fund benefits, and generally not to use scheme deficits as a reason to transfer.
Death benefits comparison can be included in the APTA but should be compared in priority against the client’s other objectives (for example a guaranteed income), and should be shown on a like-for-like basis, rather than, for example, one option showing a lump sum and one showing an income.
The APTA could explore early retirement, but the FCA warns advisers to challenge a consumer’s objective to retire early if it is not realistic.
Comparison with workplace pensions
