"It is vital that consumer protection measures are maintained as far as possible, despite the present situation."
Long-awaited changes to the FCA’s rules around Defined Benefit pension transfers have been delayed by up to six months, according to information on the regulator's website.
The FCA has been looking into the DB transfer market since the volume of transfers surged after the introduction of Pension Freedoms in 2015. It had raised concerns about the high volume of transfer advice which it regarded as ‘unsuitable’ and has stepped up its data collection and investigation of individual firms.
The issue also received a lot of attention in the last Parliament from the Work and Pensions Select Committee, not least in light of poor advice given to some members of the British Steel Pension Scheme.
In July 2019 the FCA published its final proposals to reform DB transfer advice (CP19/25) which included plans to ban ‘contingent’ charging, to introduce a new form of ‘abridged’ advice, and to crack down on high ongoing charges post transfer.
The implementation of these changes had been expected imminently, and until yesterday the FCA website said: “We will consider the feedback we receive on this Consultation Paper and publish our finalised Handbook text in a Policy Statement in the first quarter of 2020.”
But yesterday the FCA changed its webpage to say: “We will publish our finalised Handbook text in a Policy Statement in the second quarter or third quarter of 2020.”
As a result of this, changes to the rules around DB transfer advice could be delayed by up to six months.
Clive Harrison, partner at pensions consultants LCP, commented: “The DB advice market is very diverse with a mix of high quality advice sitting alongside cases where the FCA finds that members have clearly been given unsuitable advice.
"If the FCA believes that the consumer detriment from poor quality advice runs into billions of pounds, it is very disappointing that measures designed to improve the advice market have been delayed.
"Given the particular concerns in the current Covid-19 environment about pension scheme members being vulnerable to scammers, and poor quality advisers taking advantage of members’ fears, it is vital that consumer protection measures are maintained as far as possible, despite the present situation.”
Steven Cameron, pensions director at Aegon, added: “We welcome the FCA’s decision to defer its policy statement on the proposed ban on contingent charging and other future interventions on advice on defined benefit transfers. In these unprecedented times, people need advice more than ever and a contingent charge ban, leaving individuals no choice but to pay upfront for advice, would have made it more difficult for some individuals to access advice on DB transfers. The FCA had proposed a carve out from the ban for those in significant financial hardship, but in the current climate it would have been even harder to objectively assess whether an individual met that definition.
“As with everything, the coronavirus crisis affects the considerations around transferring from DB to DC. Any decision to give up a guaranteed income for life to access the pension freedoms, with ongoing stock market risks and opportunities is very personal to the individual. This, coupled with scheme by scheme funding impacts and possible changes to transfer value calculation bases mean the value of advice has never been higher.”