The FCA has today proposed a ban on contingent charging for pension transfer advice. In a raft of pensions related publications, the consultation proposing the ban has been issued alongside a policy statement on the longstanding retirement outcomes review and a feedback statement on competition in workplace pensions.
Contingent charging in this context is where the advisory fee (usually a percentage of fund value) is dependent on the client accepting a recommendation to transfer. The FCA is therefore concerned that this can lead to unsuitable advice.
CP19/25 - Pension transfer advice : contingent charging and other proposed changes makes the following proposals:
- To ban contingent charging for defined benefit transfers and conversions except for specific groups of consumers with identifiable circumstances. For example, those in poor health or under threat of losing their home.
- To strengthen existing requirements that an available workplace pension should be considered as a receiving scheme in the advice process.
- To improve consumer engagement by improving disclosure of advice charges before the advice process starts and advice and product charge disclosures in suitability reports.
- To introduce a 15 hour CPD requirement for pension transfer specialists on top of any other CPD that they are required to undertake.
- To extend data collection on firms including details of PI insurance cover excesses and exclusions.
- To stop the use of decision trees and 'traffic-light' questionnaires during triage processes.
The consultation closes on 30 October 2019 with finalised rules expected to be issued in the first quarter of 2020.
We will be issuing further comment and guidance on CP19/25, as well as the accompanying papers on workplace pensions and the retirement outcomes review, in the near future.