The FCA is planning to compel people to take independent advice if they move their pension to an occupational defined contribution (DC) scheme using the new ‘Pension Freedom’ rules. Financial Advisers providing the advice must also hold the pension transfer specialist qualification says the FCA.
Pension transfers into personal pensions are already regulated by the FCA. It is intending to extend this to include transfers from defined benefit (DB) to occupational DC schemes. Scheme trustees will be made responsible for ensuring that appropriate advice is taken.
Christopher Woolard, director of strategy and competition at the FCA said: “The new pension flexibilities bring about added choice for consumers. DB schemes pose particular issues and we need to ensure that those who are considering moving away to other arrangements are fully aware of the potential benefits they are giving up. In many cases transferring from DB to DC may not be in the member’s best interests and ensuring independent advice is taken is an important protection.”
Many professional indemnity insurers regard pension transfer business as a higher risk activity not least due to significant historical claims in this area. “Advising on these new DB transfers could have professional indemnity insurance implications – not least higher insurance premiums,” observes James Burgoyne, Director – Claims & Technical, Brunel Professional Risks. “Advisers should tell their insurers if they are planning to advise on pension transfers under the Pensions Freedom rules. Failing to do so could compromise cover if they are accused of giving bad advice in the future.”
Further information is available in the FCA’s consultation paper and press release. Articles on the proposed changes have been published by Money Marketing, Citywire and Professional Adviser.
