FCA Overhauls Defined Benefit Pension Transfer Market

• Coal miners
• British Steelworkers
• Railway workers
• British Telecom staff
• NHS
• Dockers
• Local Government
• Civil Service
• Teachers
• Armed forces
• Emergency services

The recent FCA update confirms that only 60% of pension transfer advice cases they reviewed since 2018 were found to be suitable, with 17% found to be unsuitable, and 23% where the suitability was unclear due to gaps in information. In addition, the update shows that 30 firms advising on DB transfers were facing FCA enforcement action, with a further 700, nearly a quarter of the sector, leaving the transfer market following FCA feedback.

The new measures announced include:

• Banning contingency fees to avoid conflicts of interest;
• Support and resources for customers thinking about transferring out;
• An ‘advice checker’ for customers worried about the advice they received when transferring out and details on how to complain if that advice was unsuitable;
• FCA support and resources for advisers wanting “to do the right thing and provide good quality advice to their customers”;
• A pledge by the FCA to work with other stakeholder organisations to ensure that customers can readily access information on DB transfers;
• A concerted effort by the FCA to monitor and improve standards in the DB transfer market.

Commenting on the FCA’s update, Peter McKenna, Partner, said:

“The FCA’s latest update on their work around Defined Benefit transfers gives an idea of the scale of the problem. Unfortunately, it seems that thousands of people have received unsuitable advice about whether to transfer out of their Defined Benefit scheme.

This will amount to millions, if not billions of pounds of pension money lost. However, in our experience many people simply do not know that the advice they were given was unsuitable nor do they realise just how much they have lost out on as a result of that advice. We have seen many advisers persuade clients to move out of their DB scheme saying they could get better returns elsewhere when that is rarely true.

I would advise anyone who has transferred out of a Defined Benefit scheme and was told that this would be the case to seek fresh independent advice about their transfer out of the DB scheme.”

TLW Solicitors specialise in financial mis-selling compensation claims. We have helped many individuals who received unsuitable financial advice to transfer out of their Defined Benefit (final salary) Pensions to a riskier investment or less advantageous scheme. The resulting loss to pension value and uncertainty surrounding their financial future can cause investors considerable stress and worry. Many people do not even know there is an issue.