Way back in July 2019, CP19/25 proposed a package of measures to change how advisers manage and deliver DB pension transfer advice. The measures set out were significant in comparison to prior consultations in this advice area and they aimed to reduce the number of consumers transferring when it was not in their best interest.
On the 5th June 2020 the FCA released their much anticipated response to the 2019 consultation on Pension transfer advice, PS20/6 –‘Pension transfer advice: feedback on CP19/25: our final rules and guidance’.
Commenting on the FCA policy statement on contingent charging, Justin Corliss, Senior Pensions Development and Technical Manager said:
“The FCA’s decision to ban contingent charging except in exceptional circumstances does not come as a surprise even though there is no real evidence that it leads to poor outcomes. To mitigate the impact, the FCA has chosen to move forward with abridged advice as it feels this will be a good low cost solution for many people. The exceptions to the contingent charging ban, the “carve-out”, will only cover a minority of cases. Some people will still be left without access to affordable advice, but there is a feeling that this is the lesser of two evils. What is surprising though is that few stipulations have been made regarding ongoing adviser charges even though this is also a potential conflict of interest.”
Key points and summary
The policy statement confirms the FCA will go ahead with most of the proposals in the consultation paper which are aimed at improving the quality of advice and protecting consumers.
The ban on contingent charging is scheduled to take effect from 1 October 2020.
This is the date many of the proposed changes will come into force, and is an extension to the implementation period initially put on hold due to the current Covid pandemic.
As outlined in our previous blog regarding CP19/25 many of the changes highlighted have now been confirmed and will include:
- The introduction of abridged advice.
- Advisers will be required to disclose charges and to undertake checks to confirm the client’s understanding during the advice process.
- Pension transfer specialists (PTS) to undertake an additional 15 hours CPD per year specific to pension transfer advice, in addition to their existing requirement. At least 5 of the 15 hours must be provided by an independent provider external to any firm that employs or contracts services from the PTS. This secondary requirement ensures that the PTS is not just receiving a ‘house view’ of the market.
- A requirement for advisers to consider the workplace pension (if available) as a destination for the transferred funds, and to demonstrate why any alternative solution is more suitable.
CP19/25 proposes to raise the standards of transfer advice by “enabling advisers” through improving the knowledge and understanding of Pension Transfer Specialists (PTSs) who give or check advice in relation to pension transfers. This will be a move welcomed by many and only reinforces industry standards in helping PTS’s achieve the highest professional standard expected. CP19/25 sets out a package of pragmatic and common-sense proposals that should help reduce poor customer outcomes.
Find out more
You can download a copy of the policy statement from the FCA website [Click here to access the policy statement]