Mike Morrison: FCA DB transfer plans fail to cover contingent charging

I have just finished AJ Bell’s annual tour of the UK where a host of lucky advisers got to hear me talk about the current key pension issues. It probably comes as no surprise that one of the main discussion points was defined benefit (DB) transfers. It is clear that there are a lot of advisers in the market trying to do their best for their clients, but who are perhaps swayed from this goal by the fear of retrospective regulatory intervention.As we reached the last couple of talks I had to factor in the points covered in the FCA Consultation Paper (CP) 17/16 Advising on Pension Transfers.The long-awaited consultation was published on 21 June 2017 and proposed a number of changes to the current regime of advice required when advising on transferring from a pension scheme involving a guaranteed pension income. My hope was for something that would bring some of the assumptions up-to-date but also recognise the workings of the market. The regulatory presumption that all such transfers are unsuitable is to be replaced with a statement that, for most people, retaining safeguarded benefits will be in their best interests and that advisers should have regard to this and start talks from this position. Does this change anything? It is being suggested by authoritative sources that this is not a big change and that the onus is still on the assumption that it is not the right thing to do.If it is not a relaxation of the presumption – what does this achieve? Does it make the process any better? For me, transfers should be considered on their merits on a level playing field – pension freedoms have (for better or worse) changed how we think about retirement and a guaranteed pension income, and this needs to be reflected in market practise for assessing suitability. There is also the proposal that all advice should include a personal recommendation - the CP states that: “Most regulated advice on the transfer and conversion of safeguarded benefits is currently given as a personal recommendation”, with a “few cases” not doing so.On the majority of occasions that I have mentioned this to adviser audiences this is indeed the way that everyone seems to work. There is incredulity that it can be done in any other way – it would have been interesting to see an example of one of those who did not use such a personal recommendation.The market of advisers qualified to give advice on DB transfers is small and as we see a variety of these firms ‘suspending their services for a while’ it is getting even smaller. As this happens I am sure this will be reflected in the cost of the service and the perception of the service by the consumer. For me, there were two key areas that were not covered in the CP – charging structure (particularly contingent charging) and the problems that the FCA perceive in the various outsourcing models (which appear to be some of the reasons for the abovementioned suspensions). It is vital that we are looking at this from the consumer perspective. Surely the bigger picture must be to bring the consumers into the fold rather than lock them out looking for ‘alternative’ solutions and to facilitate this to allow advisers to comfortably give advice. Mike MorrisonHead of Platform Technical

Mike Morrison: FCA DB transfer plans fail to cover contingent charging

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