FCA Overhauls Defined Benefit (Final Salary) Pension Transfer Market
On 5th June 2020, Government backed financial industry watchdog, the Financial Conduct Authority (FCA) announced a range of steps designed to tackle the issues surrounding the defined benefit (final salary) pension transfer market. As highlighted in our previous blog pension freedoms introduced in 2015 have already been implicated as a source of consumer harm by the FCA.
Defined Benefit (Final Salary) Pensions
Defined benefit (final salary) pension schemes are a very solid and dependable source of income for retirement and there must be an extremely good reason for someone to want to transfer this into a riskier type of investment. Getting the right sort of advice on this is therefore crucial.
Common industries that DB transfers affect include:
- Coal miners
- British Steel workers
- Railway workers
- British Telecom staff
- Local Government
- Civil Service
- Armed forces
- Emergency services
What’s the problem with Defined Benefit (Final Salary) Pension Transfers?
The recent FCA update confirms that only 60% of pension transfer advice cases they reviewed since 2018 were found to be suitable, with 17% found to be unsuitable, and 23% where the suitability was unclear due to gaps in information. In addition, the update shows that 30 firms advising on DB transfers were facing FCA enforcement action, with a further 700, nearly a quarter of the sector, leaving the transfer market following FCA feedback.
In announcing the review, Interim FCA Chief Executive, Christopher Woolard said:
“The proportion of customers who have been advised to transfer out of their DB pension is unacceptably high… we are still finding too many cases in which transfers were not in the customer’s best interests.”
What are the FCA Changing?
The new measures announced include:
- Banning contingency fees to avoid conflicts of interest;
- Support and resources for customers thinking about transferring out;
- An ‘advice checker’ for customers worried about the advice they received when transferring out and details on how to complain if that advice was unsuitable;
- FCA support and resources for advisers wanting “to do the right thing and provide good quality advice to their customers”;
- A pledge by the FCA to work with other stakeholder organisations to ensure that customers can readily access information on DB transfers;
- A concerted effort by the FCA to monitor and improve standards in the DB transfer market.
TLW Solicitors’ view
TLW Solicitors specialise in financial mis-selling compensation claims. We have helped many individuals who received unsuitable financial advice to transfer out of their Defined Benefit (final salary) Pensions to a riskier investment or less advantageous scheme. The resulting loss to pension value and uncertainty surrounding their financial future can cause investors considerable stress and worry. Many people do not even know there is an issue.
Commenting on the FCA’s update, Peter McKenna, Partner, said:
“The FCA’s latest update on their work around Defined Benefit transfers gives an idea of the scale of the problem. Unfortunately, it seems that thousands of people have received unsuitable advice about whether to transfer out of their Defined Benefit scheme. This will amount to millions, if not billions of pounds of pension money lost. However, in our experience many people simply do not know that the advice they were given was unsuitable nor do they realise just how much they have lost out on as a result of that advice. We have seen many advisers persuade clients to move out of their DB scheme saying they could get better returns elsewhere when that is rarely true. I would advise anyone who has transferred out of a Defined Benefit scheme and was told that this would be the case to seek fresh independent advice about their transfer out of the DB scheme.”
TLW Solicitors can help
TLW Solicitors has an experienced financial mis-selling team who may be able to help you to recover your losses even if your financial adviser or the firms you invested in are no longer trading.
Please watch our video here, where Peter explains DB transfer cases in detail.
If you think that you, a friend or loved one may have lost out financially after receiving poor advice to transfer a defined benefits pension, then please get in touch with one of the specialist financial mis-selling lawyers here at TLW Solicitors for a free, no obligation discussion.
You can ring us on 0800 169 5925, email email@example.com or complete the call-back form below.
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