With pension freedoms making defined contribution pensions increasingly attractive, an update on DB to DC transfers is long overdue.
But Aegon wants the FCA to go a step further to introduce a ‘pre-advice breakpoint’ if it is clear from early on that a transfer won’t be right for the client, saving unnecessary fees.
Greater regulatory clarity also reduces the justification for Professional Indemnity Insurers to charge extra to those offering DB advice.
Steven Cameron, Pensions Director at Aegon said: The FCA proposals clarify and reset expectations around DB transfer advice in a world of DC pension freedoms, and should give advisers confidence to advise their clients in a truly balanced way without excessive caution.
“While more robust, there’s a danger the new approach could take longer, placing upward pressure on advice fees. To counterbalance this, if it’s clear at an early stage that the adviser won’t be recommending a transfer, the FCA should allow a ‘pre-advice breakpoint’. The adviser could save time and their clients unnecessary fees if they can agree early on not to proceed to advice.
“With many individuals having frozen benefits in more than one DB scheme, the FCA should recognise that leaving one or more alone while transferring others will be the best advice for some. Advisers are well equipped to offer ‘pick and mix’ advice here.
“Advisers currently face inflated PII premiums if advising on DB transfers. Regulatory clarity should reduce the risks of unsuitable or flawed advice meaning there’s scope for PII premiums to reduce, allowing more cost-effective advice. Together with a pre-advice breakpoint, this could allow more advisers to support more individuals in a market where demand for advice far exceeds supply.”
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