"Although many people are presented with transfer options quite legitimately, scammers are also using DB transfers to part people from some or all of their hard-won retirement savings."
The Pensions and Lifetime Savings Association has responded to the FCA’s consultation Advising on Pension Transfers.
The Association has supported FCA proposals for more broadly based advice to people considering a transfer out of their DB scheme, but has raised concerns about how it wants the information presented.
The combination of pension freedoms and high transfer values, plus increased concern over pension scams, had prompted the FCA to ask whether the current rules on advising on DB transfers are still fit for purpose.
James Walsh, Policy Lead: Engagement, EU and Regulation at the Pensions and Lifetime Savings Association, commented: “The PLSA agrees with the FCA’s argument that advice should be more broadly based. It is vital that members consider their DB rights in the context of their overall circumstances, including their other assets, debts, health, family circumstances and strength of their employer.
“However, there is a risk that the proposed new Transfer Value Comparison, which would focus the member’s attention on a single set of figures, could inadvertently lead to people taking decisions which are, in fact, quite narrowly based.
“Combined with the high transfer values generated by current low interest rates, this could lead to more people transferring. The TVC should be used with caution – and should be presented in the context of the full range of factors that scheme members need to consider.
“Worryingly, one spur to activity in the DB to DC transfer area has been the increase in pension scams. Although many people are presented with transfer options quite legitimately, scammers are also using DB transfers to part people from some or all of their hard-won retirement savings. Under these circumstances, the FCA is right to ask whether the current advice requirements are still fit for purpose.”