Over the past few months there has been a lot of noise in the press about defined benefit pension transfer advice. The FCA are concerned that consumers are receiving bad advice from advisers when it comes to making decisions on transfers out of their defined benefit pension. This is because in most cases consumers would be better off leaving their db pension where it is. The FCA has published their assessment of pension transfers between 2015 and 2019 which concludes the number of consumers receiving a recommendation to leave their DB pension scheme has been consistently too high.
The FCA recently launched an “Advice checker: defined benefit pension transfers” to help consumers assess the quality of advice they have received and provide guidance on what to do if they think they received bad advice.
In the first instance, consumers are advised to lodge a complaint directly with the adviser. The adviser has 8 weeks to respond to a complaint. If the consumer is not happy with the final outcome then the FCA advise them to lodge a complaint with the Financial Ombudsman Service within 6 months.
In addition to this, the FCA has announced further action on defined benefit transfers aimed at raising the standards on Defined Benefit Pension Transfer Advise given by IFAs. A recent survey by the Office for National Statistics found that £127bn has been transferred out of workplace schemes since 2015.
The FCA is now expected to send a survey to firms in the defined benefit sector, probing them on their transfer business and professional indemnity insurance cover. The survey will investigate the follow information:
- The number of clients the firm recommended to transfer
- The number of clients the firm recommended not to transfer
- The number of clients the firm allowed to proceed as insistent clients
- The number of clients who opted out in order to transfer
- The number of clients who discussed a pension transfer with the firm but did not proceed to receiving full advice
- The average transfer value the firm advised on
- The percentage of the firm’s total income that results from providing pension transfer advice
- The number of clients who transferred but did not engage with the firm for ongoing advice,
- The number of Pension Transfer Specialists at the firm, and
- The range of charges clients were charged for the recommended investment
- They will also be asking some information around the firm’s Professional Indemnity Insurance (PII)
The FCA’s continued focus on the defined benefit pension transfer industry has led to many IFAs leaving the pension transfer market completely as they struggle to gain PII cover and comply with the latest regulations.
Grove’s Approach to Defined Benefit Pension Transfer
Grove Pension Solutions has been providing Defined Benefit Pension Advice for over 13 years. We believe that in most circumstances it is not advisable to transfer out of DB pensions. Our stats shows that out of the 15,700+ clients requesting pension transfer advice we only advised 5,382 clients to transfer their pensions. In the majority of cases we found the client would be worse off if they transferred out of their DB pensions scheme.
It is extremely important that all clients get the best advice and are made fully aware of the benefits and risks of transferring a DB Pension.