Financial Conduct Authority  

Watchdog sides with FCA over 'extortionate' DB advice claim

Watchdog sides with FCA over 'extortionate' DB advice claim

The Financial Conduct Authority has successfully defended itself against an "insistent client" who claimed its rules requiring consumers to seek advice on pension transfers were "unnecessary". 

In a complaint escalated to the Complaints Commissioner in October the consumer argued they did not need advice on a defined benefit transfer and claimed the regulator's rules would instead leave them "exploited by IFAs for advice". 

Under the Pension Schemes Act 2015 anyone seeking to transfer funds worth more than £30,000 out of a defined benefit scheme must seek independent financial advice first.

The rules were put in place to safeguard consumers but in this case the complainant argued they already had sufficient knowledge of the pension sector and called for a system which allowed "well informed investors" to sign a waiver on advice.

The consumer claimed they faced "extortionate" rates for pension transfer advice and would struggle to find an adviser willing to execute the transfer on an insistent client basis. 

The complainant said: "I am being forced by a 'catch-all' and unnecessarily blunt regulatory protocol to pay a significant sum of money for advice that I neither need nor want, and am qualified so to decide, and that is on an increasingly challenged assumption I can even find an IFA prepared to execute the transaction in the first place."

The consumer claimed they would be "at least £3,000 financially worse off" as a result of the rules and left "exploited by unscrupulous IFAs for advice", which they admitted they intended to reject anyway. 

The FCA recently closed a consultation on contingent charging, launched when the regulator found too many consumers were being advised to transfer out of their defined benefit pensions.  

The FCA did not uphold the consumer's complaint on the grounds that issues concerning the regulator's rules, codes and general guidance were excluded from its complaints scheme - a decision the Complaints Commissioner agreed with. 

Commissioner Antony Townsend said: "It is not uncommon for regulation to have to strike a difficult balance between protecting vulnerable clients and not unnecessarily restricting people who are less vulnerable.

"Whether the current regulatory requirements strike the right balance in this case is clearly a matter for continuing debate, but it is not a matter which I can resolve." 

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