The FCA remains "extremely concerned" about firms exploiting consumers'lack of knowledge when transferring from defined benefit schemes.
In April 2015, the Government gave consumers with defined contribution pensions more freedom around how they could access their pension savings. Although the changes only applied to DC schemes, it has led to members with DB pensions transferring to DC to take advantage of the freedoms. At the same time, the Government introduced a requirement to members transferring more than GBP 30,000 of DB benefits to have first taken independent financial advice.
In October 2017, the FCA published research that only 47% of advice they reviewed on DB to DC transfers could be shown to be suitable based on the information in the file. The restructuring of the British Steel Pension Scheme towards the end of 2017 became a high profile example of members being given poor advice. The FCA review found that only 51% of the advice could be shown to be suitable. Ten firms agreed to cease to advise on transfers once investigations into the British Steel Pension Scheme commenced, and one firm has gone into liquidation, leading to claims on the Financial Services Compensation Scheme. It is expected that there will be a number of claims from individuals who transferred out based on poor advice. The Government acknowledged in the White Paper on defined benefit that there "are lessons to be learned" from how the British Steel Pension Scheme was restructured.
During 2017, the FCA had been considering changing its Handbook guidance on transfer: replacing the starting point for an adviser that the transfer will be unsuitable to one that "for most people keeping [defined benefits] is likely to be in their best interests". However, the FCA has recently decided against relaxing the handbook in this way and is considering whether the qualification requirements for pension transfer specialists should be increased.
During 2018, the FCA will be collecting data from all firms that have pension transfer permissions to assess practices across the entire market.
The pension transfer market therefore remains a somewhat fraught area: a combination of poor advice, scams (where transferring members are encouraged into unsuitable investments) and "insistent transfer" members who decide to transfer against advice that it is not in their best interests to do so. All of this means this remains a fertile area for claims. It is a concern this remains a problematic area 30 years after personal pensions were introduced and the first pension mis-selling scandal of the late 1980s / early 1990s.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
