The Financial Conduct Authority (FCA) has unveiled new proposals designed to tighten up the rules on pensions advice
The proposals are in response to the introduction in April 2015 of greater pensions freedoms, which have given consumers a wider range of options when it comes to accessing their pension savings.
The move also follows on from a report on pensions advice released by the FCA back in January which stated:
“We are aware that some firms have been advising on pension transfers or switches without considering the assets in which their client’s funds will be invested.
“We are concerned that consumers receiving this advice are at risk of transferring into unsuitable investments or – worse – being scammed.”
Six months on, the FCA has laid out a set of plans aimed at protecting consumers and ensuring they must have access to all the relevant advice to make an informed decision when it comes to transferring a pension.
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.”
The new proposals on pensions advice include:
- Replacing the current transfer value analysis requirement (TVA) with a comparison showing the value of the benefits being given up
- Introducing a rule to require all advice in this area to be provided as a personal recommendation, which fully reflects the client’s circumstances and provides a recommended course of action
- Updating FCA 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
- Introducing guidance on the role of a pension transfer specialist
For more information and insight on retirement planning visit the Scottish Widows employer hub.