Trustees and sponsors of defined benefit (DB) schemes should not see Financial Conduct Authority (FCA) rules as a 'barrier' to providing members support, according to LCP and Eversheds Sutherland.

A blog penned jointly by the two firms looked at a guidance document published by the FCA and The Pensions Regulator (TPR) that clarified how employers and trustees could provide members with support in making choices about their options within or outside their pension scheme, without straying into offering full blown advice.

This document had been published after the FCA’s consultation into DB transfer advice unearthed concerns about providing members with help, after the watchdog appeared to suggest that schemes which provided information about alternatives to scheme benefits, such as transfers or drawdown investment, might be acting beyond their brief.

Key points raised in the blog included the clarification that there is no barrier to schemes providing factual information about member rights and options within the scheme, while they are also free to provide unsolicited cash equivalent transfer values.

Additionally, schemes who do not act to provide members with support risk doing damage by inaction, despite potential legal risks around providing support which goes too far.

LCP partner, Jonathan Camfield, commented: “Most trustees and corporate sponsors want to do their best to help members make the right decisions, but some may feel nervous that they will be exposed to legal risk if they offer further support.

“However, there is also clearly a risk in inaction and that’s why it’s important for schemes to understand that there is no barrier to them providing factual information around members options within the scheme.

“Thinking about how they can help their members make better decisions by helping them access high quality, impartial financial advice where appropriate will give them peace of mind that they are helping members and the new FCA rules support this direction of travel.”

Eversheds Sutherland legal director, Charlotte Cartwright, said: “There are pros and cons to schemes appointing IFAs, and risk both in doing so and in doing nothing. This means it’s important for trustees to take an active decision about whether to get involved in this area.

“For example, this could involve putting it on trustee meeting agendas for consideration, and properly understanding the legal / structural risks of both action and inaction before taking a decision, based on their scheme’s circumstances.

“The role that IFA’s can play is becoming increasingly important and more schemes are making them available to members. Where IFAs are appointed, as part of managing risk. schemes need to have plans in place not just for initial due diligence but also to ensure that the quality of advice is maintained on an ongoing basis.”

Share Story: