Concern over ‘high’ proportion of advice in pension transfers

AN “UNACCEPTABLY high” proportion of people in salary-based pension schemes have been advised to transfer out of them, according to the City regulator.

The Financial Conduct Authority (FCA) has launched 30 enforcement investigations arising from concerns identified while investigating defined benefit (DB) pension transfers.

Where firms have not met the required standards, it expects them to look at their past business and pay redress and where appropriate.

The regulator also set out a wider package of measures to drive up standards in the DB pension transfer market, including a ban on contingent charging – where a financial adviser only gets paid if a transfer goes ahead – from October 1, 2020.

It is also writing to about 7,700 former members of the British Steel Pension Scheme who transferred out, to help them go over the advice they received and complain if they have concerns.

The interim chief executive of the FCA, Christopher Woolard, said: “The proportion of customers who have been advised to transfer out of their DB pension is unacceptably high.”

DB pensions, such as final salary schemes, are often described as “gold-plated” because they promise savers a certain level of income when they retire.

They have become increasingly rare and have largely been replaced by defined contribution (DC) schemes, where the saver bears the risk of how much retirement income they end up with.

The regulator said some files it reviewed had included advice given to members of the British Steel Pension Scheme.

Some 192 instances of advice to former British Steel Pension Scheme members were reviewed. Just over a fifth appeared to be suitable, 47 per cent appeared to be unsuitable and 32 per cent appeared to contain information gaps, the regulator said.