Steelworker blames FCA for killing DB transfer advice

In a case escalated to the Complaints Commissioner the regulator defended accusations financial advice was no longer available to those wishing to transfer out of a defined benefit scheme, in particular the British Steel Pension Scheme. 

The complainant was a British Steel member looking to transfer his pension, reportedly worth more than £280,000, out of the scheme, but was unable to find an adviser willing to complete the transfer as a result of what he claimed was the FCA's work in the market. 

The case follows warning bells sounded over the past year that regulatory action in the defined benefit sector and a shrinking professional indemnity market would jeopardise access to advice, either by consumers being priced out of the market or lack of supply. 

The commissioner sided with the watchdog however, and ruled the FCA was not responsible for a consumer being unable to find regulated transfer advice, instead concluding the arguments for "tightening up this area of pensions advice were clearly very strong ones". 

There is evidence that, despite this regulatory activity, there are still substantial numbers of firms that can provide advice on pension transfersFinancial Conduct Authority 

Commissioner Antony Townsend said: "While it is very unfortunate that you have encountered difficulties in obtaining advice, the FCA cannot be held liable for this, since the requirement to obtain advice was imposed by parliament and, in any event, the FCA has immunity from being sued for damages, with very few exceptions."

The steelworker had also asked the regulator to source and recommend an adviser willing to complete a pension transfer. 

The commissioner told him he could find advisers qualified to provide advice on the Money Advice Service directory and check if a firm has permissions to offer pension transfer advice on the FCA website.

The FCA said: "There is evidence that, despite this regulatory activity, there are still substantial numbers of firms that can provide advice on pension transfers.

"In December 2018, around 2,500 firms reported to the FCA that they were active in the DB advice market.

"This does not support your suggestion that qualified financial advisers are not available to assist those wishing to transfer out of a DB scheme."

In March outgoing FCA boss Andrew Bailey told MPs 370 firms had left the defined benefit transfer sector over the past two years, totalling 12 per cent of the entire market. 

But Mr Bailey admitted the general view at the regulator was pension freedoms had been "rushed through too quickly". 

Earlier this year the Personal Finance Society warned the defined benefit market was set to shrink even further, as a result of rising professional indemnity insurance costs and the effects of the coronavirus lockdown.

Keith Richards, chief executive officer of the PFS and chair of the Pension Advice Taskforce, said more than 1,300 advisers had signed up to its transfer gold standard in the past year but "a significant number" were expected not to re-register as they gave up transfer permissions.

Mr Richards has previously warned the hardening professional indemnity insurance market risked restricting access to advice and "preventing people from being able to exercise their rights under pension freedoms".

This week an adviser told FTAdviser how a handful of defined benefit transfer cases had sent his insurance premiums soaring by 430 per cent, resulting in him "paying for the privilege of doing the work".

Steve Carlson, chartered financial planner at Carlson Wealth Management, accepted there were numerous cases where consumers had been wrongly told to transfer by "cowboys" who "treated everyone the same", but warned of "clear client detriment" in the current market for those clients for which transferring out of a defined benefit scheme may be the right option. 

rachel.mortimer@ft.com 

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.