Joint protocol on DB transfers working well - FCA director

The regulatory joint DB scheme transfer protocol is working well, according to the Financial Conduct Authority (FCA).

Speaking at an event on 2 October, FCA director of supervision, life insurance and financial advice, Deb Jones, said that the agreement, which includes The Pensions Regulator (TPR), Financial Ombudsman Service, Financial Services Compensation Scheme and Money and Pensions Service has produced positive results for many DB savers.

The protocol was created is to enable collective early intervention by the five regulatory bodies to help scheme trustees ensure that their members are adequately informed when considering transferring their DB pensions.

Jones said that the protocol has ensured that the organisations are “sighted on issues” arising at DB schemes and can share intelligence and act in a coordinated way to prevent the implementation of poor advice.

She gave an example of how the FCA had recently identified a DB scheme that was undergoing a complex restructure through early engagement with TPR.

The FCA was able to quickly identify and rectify potential weaknesses in the advice being provided to members on transfers.

The FCA has reported that between the introduction of pension freedoms and September 2018, 69 per cent of DB members have received advice to transfer out of their schemes.

However, in its latest review on the matter, the FCA has found that only around half the advice it reviewed was suitable.

“In our recent consultation paper, we estimated that if the levels of unsuitable advice found in our thematic reviews are replicated across the entire market, the harm of unsuitable advice on DB transfers is in the range of £1.6bn to £2bn each year,” said Jones.

As a result, the FCA is set on improving pension transfer advice, along with TPR, said Jones, which may result in the FCA extending its assessment of advisers in the DB transfer space in 2020.

“This year, we have been visiting the firms most active in this market, and will continue doing so throughout the remainder of 2019,” she revealed.

“We will also be in contact with all firms where we have identified potential harm in their DB pension transfer advice. We will set out our expectations and the actions they should take.

“Depending on the outcome of our 2019 assessments, we will consider extending our 2020 assessments to include a wider range of firms. We will also roll out a series of events aimed at raising standards in the industry and engaging with a wider range of stakeholders.

"This will continue to be a priority for our work over the coming year. We will carry on until the pension transfer advice market has reached an acceptable standard.”

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