Pensions - Articles - Comment on FCAs Advising on Pension Transfers consultation


Commenting on the implication in the FCA’s Advising on Pension Transfers consultation that providing personalised illustrations to show the conversion of a DB pension through a transfer value will be viewed as regulated advice, Ryan Markham, Partner and Head of Member Options, Hymans Robertson, says:

 “While the guidance published by the FCA looks generally helpful in its aim to help drive up advice standards across the board but, buried in page 82 of the consultation is highly contentious wording which will be of concern to trustees and sponsors of DB schemes. It suggests that trustees providing personalised illustrations showing conversion of DB pension through a transfer value (into annuity or drawdown) could well be viewed as giving members regulated advice. Statutory transfers are fine but it’s not clear from the guidance whether in certain circumstances providing an illustrative transfer values proactively could also fall foul of this and be classified as an inducement.

 “This issue could have significant implications for trustees and sponsors in what information they can confidently provide to their members to help educate and equip them for retirement. It will be especially relevant where schemes provide this information as standard at retirement or have digital tools which allow members to explore transfer and conversion options on demand.

 “This can’t be good for members. On the one hand, If members can’t be provided with these figures we expect greater risk of members simply sleepwalking into DB retirement. They will have no idea of what a transfer could mean for them and therefore no reason to explore their options. On the other hand however, if all members can be provided with is a transfer value they will simply see a big number without the context and potentially want to access the cash. It will also put them at increased risk of falling victim to scammers or being preyed upon by unscrupulous advisors. Either way, not being able to provide this information feels like a real step backwards and counter to giving members enough information to make well informed life changing choices.
 
 “Members with DB transfer values above £30k have to take financial advice before transferring. It feels counter intuitive that providing members with this information could be viewed as advice given this overriding advice requirement.

 “We call for far greater clarity on the proposals and debate across the industry on this issue. The guidance vs advice boundary continues to blur and in a way that isn’t helpful in supporting financial education and quality member outcomes.”
   

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