The Financial Conduct Authority has said it is to collect data from all financial advice firms with permission to advise on defined benefit pension transfers, as Work and Pensions Committee chair Frank Field has warned of a “huge misselling scandal”.
In a letter to the Work and Pensions Committee from the FCA’s executive director of supervision – investment, wholesale, specialist, Megan Butler said the regulator will be “collecting data from all firms who hold the pension transfer permission with the intention of assessing practices across the entire market to build a national picture”. It has already asked a further 45 advice firms for information and plans to ask the remaining firms later on in 2018.
Within the letter, Butler said an initial FCA investigation found some advice firms had ‘industrialised’ their DB transfer business so that they were no longer focused on their clients’ individual circumstances and needs.
However, the FCA does not believe that a blanket ban, or suspension, or DB transfers is warranted, and it would only introduce a blanket ban on something as a result of “considerable evidence of consumer harm”. Butler pointed out such a ban could “infringe” current legislation, which would be a matter for parliament.
The letter is part of the Committee’s investigation into the British Steel Pension Scheme and inappropriate advice that was given to members in relation to transferring out of the scheme. Committee chair Frank Field said the responses to do nothing to change his mind that the FCA’s action on the scheme was “grossly inadequate”.
“The FSA was reformed and renamed amid concerns that it was too close to the financial businesses it was supposed to regulate. From their intervention in this affair it seems clear that the FCA’s actions still effectively protect these businesses’ ability to make money out of pension funds, rather than protecting pension savers. They must take care they are not sleepwalking into yet another huge misselling scandal.”
In addition, the Committee revealed that the FCA asked Active Wealth to cease trading 14 months after it initially started looking into the firm, a matter of weeks before the original deadline for BSPS members to make a decision on their pension.
The Committee has also published responses it received from financial advice firm Active Wealth, and introducer firm Celtic Wealth, which the Committee said “raise a series of further questions about the FCA’s actions in regard to the BSPS”.
The letter from Active Wealth director Darren Reynolds reveals highest transfer value that Active Wealth handled in respect of BSPS clients was £790,404 and the average was £398,347, representing upwards of £40 million transferred out of BSPS on their advice alone.
“The highest and average fees paid to them so far described as £1,500 and £1,443 respectively. The fees seem very small relative to the huge transfer values and it is unclear how many BSPS clients signed up to an ongoing adviser charge or what that might cost them ultimately in total,” the Committee said.