Pension transfer advisers will be required to have specific qualifications in providing investment advice under new rules from the Financial Conduct Authority (FCA)
The FCA said this week that it is taking forward most of the proposals put forward for consultation in March 2018, which mainly related to transfers from defined benefit (DB) to defined contribution (DC) pension schemes.
The changes include a requirement for all pension transfer specialists to hold a specific qualification for providing advice on investments by October 2020, enabling advisers to identify whether a proposed pension scheme and investment solution is consistent with the client’s needs and objectives.
‘The FCA also expects advisers to consider their client’s attitude to, and understanding of, the risks of giving up safeguarded benefits for flexible benefits. These new rules should improve the advice that people get when considering transferring their pension, including as a result of the pension freedoms,’ said an FCA spokesperson.
The FCA also sought views on whether to intervene in charging structures. This could include banning contingent charging, which is when a fee for advice is only paid when a transfer goes ahead. It also asked about the impact on access to advice due to restrictions on charging models.
‘Contingent charging is a complex area and the responses to the FCA’s consultation confirm its initial analysis that the evidence it has seen does not show that contingent charging is the main driver of poor outcomes for customers. The FCA’s supervisory work to date has also identified a number of other causes of poor advice, and it will carry out further work on the quality of advice,’ said the spokesperson.
Christopher Woolard, FCA's executive director of strategy and competition said the new rules will give pension transfer adviser ‘greater certainty and confidence’.
‘We expect our interventions to improve the quality of advice which will help to reduce the number of complaints against advisory firms. We will measure consumer outcomes through our supervisory work.
‘Any changes to our rules on contingent charging could have implications for the supply of advice. Because of the significance of this issue to all stakeholders in the market, we will carry out further analysis and consult on new interventions if appropriate in the first half of next year,’ he said.
Report by Rob Munro