14th June 2018

PFS issue new pension transfer good practice guide

The Personal Finance Society have issued an updated ‘good practice guide’ covering transfers from defined benefit to defined contribution pension schemes.

It replaces last year’s update to the original guidance issued in 2016 and follows the FCA’s March policy statement ‘advising on pension transfers’ (18/6). 

PFS chief executive, Keith Richards, says mandated professional advice is a vital consumer protection component and the updated guide aims to give members clarification around changing advice requirements, as well as ongoing good practice gained from subject matter experts and practitioners from across the sector.

“Defined benefit pension transfer advice continues to be a key area of focus for the FCA, government and consumer lobbyists,” he commented, “so it is particularly important that firms advising on DB pension transfers ensure their clients fully understand the implications of a proposed transfer before deciding whether to proceed. 

“Accordingly, our new guide covers a number of important areas, including risk appetite, the need for holistic advice, qualifications and contingency charging. It also features sections on the wider tax issues, cash flow modelling, insistent clients and death benefits.”

Richards went on to acknowledge that after a programme of specific supervisory work, the FCA recently concluded that only 47 per cent of the DB to DC transfer advice reviewed could be shown to be suitable, based on the information in the adviser’s file, which will inevitably lead to further scrutiny and supervision.

“We are particularly alive to the issues surrounding the availability of professional indemnity insurance (PII) for DB transfer advice and have seen evidence of withdrawn cover, or increased cost and excesses, for some advice firms at renewal,” he stated.

“While this is an overreaction in many instances, it can only be addressed if we establish a clear picture of what good looks like in the pension transfer space, and in particular the concerns raised regarding conflicts of interest and insistent client transactions.

“The challenges presented can often cause emotive and defensive reactions, on the basis that an adviser can only respond based on their own client interactions. But it is critical that we address concerns, real or perceived, and protect the advances made by the profession in recent years to ensure they are not derailed by the actions of a small number of firms. Now is the time to be extra diligent and robust in respect of the much-needed advice consumers require in this area,” he concluded.

Link to guide

Partner Guides & Whitepapers, Pensions