FCA to review DB pension transfer redress guidance in 2021

The Financial Conduct Authority (FCA) will conduct a review before the end of the year regarding its guidance for how firms calculate redress for unsuitable defined benefit (DB) pension transfers.

The FCA said it intended to consult on any changes in guidance that it might wish to implement following the review, adding that it had committed to reviewing the guidelines every four years when they were first published in 2017.

The watchdog stated that, during the period of the review, it expected firms to assess complaints about unsuitable advice fairly, consistently and promptly, calculate any redress due in line with the current approach and comply with any offer of redress accepted by the consumer.

It added that firms not meeting these expectations should make appropriate changes to their processes before issuing any new redress offers.

The FCA added that, in the course of its preparation for the review, it had identified some areas where firms might benefit from clarification on how it currently expected redress to be calculated when following the guidance.

It explained that it should be ensured that redress enabled consumers to cover the cost of ongoing product charges and regular adviser charges up to normal retirement age, both on the transferred pension and the amount of redress.

Along with further measures, the regulator said the redress amount should allow for personal pension charges, where known, up to a maximum of 0.75 per cent per year and allow for regular adviser charges on top of this.

Additionally, the FCA said that where redress is paid in the form of a lump sum, firms should ensure that it is adjusted to take account of the consumer’s individual tax position and wider circumstances.

To comply with this, firms might need to check if the consumer is a taxpayer, determine whether payments might change their marginal tax rate and adjust any payment to ensure they are not disadvantaged by it.

The guidance is for firms to return consumers to the position they would have been if they had remained in their DB scheme, and is done by calculating appropriate redress in cases where negligent advice led savers to transfer all or part of the cash value of accrued benefits from a DB scheme into a personal scheme.

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