Changes to the pension transfer advice process

06 Apr 2018

The Financial Conduct Authority (FCA) recently announced changes to the pension transfer advice process. The changes are designed to improve the quality of the advice provided and help individuals to make informed decisions based on their own personal circumstances.

The changes include:

• Transfer advice to be provided as a personal recommendation that takes account of the member’s individual circumstances.

• To replace the current transfer value analysis with a requirement to undertake a personalised analysis of the member’s options; and

• A requirement to provide a comparison which shows the value of the benefits being given up.

In addition, the FCA is also considering further changes in relation to the fee structures currently used by advisers as well as the need for advisers who provide pension transfer advice to have the same qualifications as investment advisers.

The FCA has further agreed to currently maintain its view that an adviser should start from the assumption that a transfer from a defined benefit (DB) scheme is likely to be unsuitable. However, this should not stop an adviser from recommending a transfer from a DB scheme where it is deemed the transfer would be suitable.

The FCA's Executive Director of Strategy and Competition, Christopher Woolard, said “defined benefit pensions are valuable so most people will be best advised to keep them. However, where people are considering a transfer, it is vital that they get good advice to enable them to make an informed decision”.