FCA announces changes to pension transfer advice rules

The proposed changes include requiring transfer advice to be provided as a personal recommendation, and replacing the current transfer value analysis with a comparison to show the value of the benefits being given up.

The FCA will also update its guidance on assessing suitability when giving a personal recommendation to convert or transfer safeguarded benefits, "so that advisers focus on whether a transaction is right for a particular individual".

Speaking on Twitter, former Pensions Minister Steve Webb said this "softens the line on whether DB to DC transfers are a bad idea", adding that advisers "will no longer have to 'assume' that a transfer is unsuitable".

The FCA says the changes aim to reflect the increased demand for pension transfer advice since the introduction of the pension freedoms.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said: “Defined benefit pensions, and other safeguarded benefits such as guarantees, are valuable so most consumers will be best advised to keep them. However, we recognise that the environment has changed significantly, so we want to ensure that financial advice considers the customer’s circumstances in full and recognises the various options now available to them.

“Our new approach should better equip advisers to give the right advice so that consumers make well informed decisions.”

Philip Brown, Head of Policy at LV=, commented: “The regulator’s proposed changes to pension transfer advice are welcome news for people approaching retirement. Since 2015, there has been a stark rise in the number of people wanting to transfer out of their defined benefit scheme to take advantage of the Freedom and Choice reforms. Therefore it’s vital there are strong safeguards in place to protect people from making choices without first understanding all the risks.

“We wholeheartedly agree advice on transfers should be a personal recommendation and strongly support changing how transfer values are presented. These changes should mean people aren’t unduly influenced into giving up valuable benefits and ensure they can have a safe and secure retirement.”