FCA investigates 30 firms over pension transfer advice
Britain’s financial watchdog has launched 30 enforcement investigations into firms that have given bad advice to customers about transferring out of their defined benefit pension schemes.
The Financial Conduct Authority has banned financial advisers from getting paid only when a customer transfers a pension, known as contingent charging, which creates a bias for advisers to recommend a transfer.
The watchdog said the move to investigate 30 firms followed its latest review of the pension transfer market, which it has been monitoring since consumers were given the freedom in 2015 to move their pension pots between schemes or to withdraw their money.
“The proportion of customers who have been advised to transfer out of their defined benefit pension is unacceptably high,” said Christopher Woolard, the interim chief executive of the FCA. “While much of the advice we looked at was suitable, we are still finding too many cases in which transfers were not in the customer’s best interests.”
The FCA said there had been an improvement between 2015 and 2018, with the suitability of advice rising from 47% to 60% across the period. However, it said it remained concerned at the number of cases where unsuitable advice was given or there were “information gaps”.
“The number of files where the advice appeared unsuitable was 17% and this remains unacceptably high,” the FCA said. “The FCA is undertaking 30 enforcement investigations arising from concerns identified in the course of its programme of defined benefit transfer work.”
The FCA also published a review of the British Steel pension scheme, where members have been “preyed on” by advisers getting about £6,000 per case they convinced to transfer out.
In a review of 192 cases of steel workers, 47% were found to have been given unsuitable advice and 32% had “information gaps”. The FCA, which has already written to almost 4,000 former scheme members advising them how to complain, intends to contact all members.
“Given these latest findings, the FCA intends to write to all 7,700 former members of the British Steel pension scheme for whom contact details are available, who transferred out,” the FCA said. “This will help them revisit the advice they received and to complain if they have concerns.”
The FCA has also produced an “advice checker” to provide customers with information about the advice they should have received.
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