Advice firms appear split on whether they will increase charges for pension transfers following the Financial Conduct Authority’s new rules.
Earlier this month the FCA published new proposals on advice relating to pension transfers where consumers have safeguarded benefits.
The proposed changes include requiring transfer advice to be provided as a personal recommendation, and replacing the current transfer value analysis with a comparison to show the value of the benefits being given up.
But the FCA’s own analysis showed the new rules could push up the cost of a personal recommendation on pension transfers up by £1,625.
Jim Stevenson, pensions technical manager at Ascot Lloyd, said: “While we’re in favour of the FCA proposals as they stand, they will inevitably make transfers more demanding and harder to justify.
“The proposals are likely to increase the demands on qualified pension transfer specialists, who are now expected to be able to demonstrate relevant experience, up to date knowledge and the depth to which they review reports.
“All of this can only increase the cost of advice provided to potential transferors, but given the large sums involved in many transfers, their very size makes expert and qualified advice all the more important.”
Mike O’Brien, group regulatory director of Tenet, agreed but said it was too early to say what the impact would be.
He said: “Insisting that the advice must be a personal recommendation, and that the transfer specialist must also review its suitability, can only be a good thing. Whilst it may add additional cost, the net benefits to the customer justify this.
“It may result in an increase in charges to review enhanced transfer value cases, but the cost implications for reviewing conventional DB cases cannot be determined until the final rules are confirmed.”
But some firms said they were unlike to increase their charges as a result of today’s action.
A spokesman for pension transfer specialist Tideway said: “Where we are recommending a transfer in to our own investment portfolio or one of our selected discretionary managers we won't be increasing our fees.
“We are already doing much of what the FCA paper lays out with just a few changes to the calculations around replacement annuity costs.
“We are already showing alternative critical investment returns for flexible drawdown as part of our current analysis.”
Meanwhile Patrick Connolly, head of communications for Chase de Vere, said: “We apply a holistic, needs- and objectives-based approach when advising on possible defined benefit pension transfers
“The proposals in the FCA paper weren’t a huge surprise and don’t cause us any real concerns as we are already addressing the advice issues they’ve highlighted
“We don’t see the FCA paper leading to increased advice costs or making transfers harder to justify, unless firms aren’t currently undertaking a comprehensive assessment before making their recommendations.”
A spokesman for St James’s Place said the company had no plans to increase its charges and declined to comment on the FCA’s analysis.
damian.fantato@ft.com
