The Financial Conduct Authority (FCA) recently produced the results of its DB transfer survey in which it stated it was ‘concerned and disappointed’ at the amount of DB transfers. A statement which, I imagine, is based on the assumption that transfers are not always in the member’s best interests, and a belief that a high number of transfers means that incorrect decisions are being made.
Transfer values can be extremely beneficial for individuals given the right circumstances. Recent low yields will also have made transfer values attractive.
It has been a requirement for some time that individuals have to obtain independent financial advice before transferring amounts over £30,000. This should have helped manage the risk of dubious decision making. However, the concern now is that financial advice is not meeting the mark and poor decisions are being made right, left and centre.
The FCA is working to combat advisers that are not providing advice of the expected standard. They are writing to firms where a potential for harm has been identified, to set out expectations for transfer advice and actions the firm should take to improve the quality of their advice.
This is a great project to tighten up standards across the industry. I expect, however, that it could be a slow process.
Trustees can also take measures now to protect members’ interests by giving them a route to quality financial advice rather than having them rely on the powers of Google. ‘At Retirement’ platforms can be used to ensure individuals are:
- aware of their options under the scheme
- understand these options, and
- have a straight through process to a trusted adviser to provide them with quality, well-considered advice.
This should also help to protect pension scheme members against pension scams which are becoming more complex and imaginative in every iteration.
The issue has to be tackled both from an industry perspective and a scheme perspective to ensure good outcomes for all. An excess of poor financial advice may result in a repeat of the mis selling scandal. It is important that trustees and IFAs make sure they are not in the firing line.