FCA considering ban on contingent fees for pension transfer advice

The FCA acknowledged that contingent charging, where a fee for advice is only paid for when a transfer goes ahead, "is a complex area, where any action taken may have an impact on access to advice".

However the regulator says it is planning to intervene on charging structures "given the difficulty in managing the conflicts of interest that exist when providing transfer advice".

The FCA says it will maintain its position at this stage that an adviser should start from the assumption that a DB pension transfer will be unsuitable, reflecting the "high proportion of unsuitable advice seen in supervisory work and need for further consideration of how transfer advice should be paid for".

New rule changes announced today include requiring advisers undertaking pension transfer advice to have the same qualifications as investment advisers, and requiring transfer advice to be provided as a personal recommendation that takes account of a consumer’s individual circumstances.

They also replace the current transfer value analysis with a requirement to undertake a personalised analysis of the consumer’s options and a comparison to show the value of the benefits being given up.

Christopher Woolard, executive director of strategy and competition at the FCA, said: "Defined benefit pensions are valuable so most people will be best advised to keep them. However, where people are considering a transfer, it is vital that they get good advice to enable them to make an informed decision.

"We are also looking at whether further changes are needed to improve the quality of advice in this area. In particular, we recognise that there is an inherent conflict of interest when advisers use a contingent charging model so we are asking for views on whether we should ban contingent fees for pension transfer advice. Defined benefit pension transfer advice continues to be a key area of focus for the FCA."