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FCA Reviews Pension Transfer Cases &
Tells Advice Firms to Improve

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The financial services regulator, the Financial Conduct Authority (FCA), conducted the review, knowing that retirement decisions are more complex than ever and that advisers have a key role in protecting their customers from financial harm.

Almost 1000 advice firms provided data for the FCA’s research, and a sample of advice models and advice files was also studied. The document produced by the organisation is part of a wider strategy to maintain high standards within the industry, known as The Consumer Duty (2023).

The introduction of pension freedoms in 2015 meant people had more choice in how to invest and access their pension money, but this attracted unscrupulous advisers and led to financial mis-selling scandals, such as that affecting members of the British Steel Pension Scheme (BSPS). Further, the introduction of auto-enrolment pensions in 2012 means more people than ever are investing their money for retirement.

The FCA wants to ensure customers understand their investments and attitude to risk, know where to seek support (from both financial advisers and sites like Pension Wise), and are better protected from scams. This applies to both the accumulation (saving) and decumulation (drawdown) phases of investing.

Director for Consumer Investments, Lucy Castledine, wrote to financial firm bosses on 20th March 2024 outlining the FCA’s review findings and setting out next steps.

In her letter, she said that the review related to retirement income advice and found “examples of both good and poor practice across the market.” She went on to say that the FCA “saw that some firms may not be meeting the needs of their customers, potentially leading to poor outcomes.”

She recognised that:

  • Investing for retirement is complicated, and choosing the right funds and deciding when and how to access the money comes with risks.
  • Advisers play an important role in helping consumers make the right choices and secure good outcomes.
  • Firms must have adequate systems and controls in place and monitor outcomes.

If investors receive unsuitable retirement income advice, there is the potential for customers to have less money in their pension pot, pay higher than necessary charges or invest in funds that are not suitable for their needs.

The FCA letter outlined several areas where firms could do better, including:

  • Income withdrawal strategies: Some firms were not using cash flow modelling to show customers how much money they would withdraw over their expected lifetime.
  • Risk profiling: Some advisers could not provide any evidence of carrying out this important assessment, while others produced risk scores that were at odds with customer objectives and capacity for loss.
  • Advice suitability: To provide their customers with the right guidance, advisers need to gather detailed information about their customers’ spending habits, lifestyles, and future income needs.
  • Ongoing review: Many people pay for ongoing advice but fail to receive it, particularly regarding whether or not their investments continue to be suitable for their needs over a longer period of time.

The FCA’s letter mentioned a Retirement Income Advice Assessment Tool and an article on Cashflow Modelling, both of which are intended to help advisers deliver suitable advice.

Ongoing financial regulation ensures that firms follow the rules, act in good faith toward their customers, and work hard to achieve the best outcomes for them. Failure to do so means firms and advisers can be held to account, and the FCA uses its enforcement powers to protect customers. Firms can be stopped from carrying out certain financial activities or prosecuted.

Sarah Spruce, Legal Director and Head of the Professional Negligence team at TLW solicitors, says:

“It’s good to see that the FCA is clamping down on financial advisers and firms that don’t have their clients’ best interests at heart. A pension investment is one of the biggest financial commitments you will ever make, and you want to know that you’re getting the right advice and support.

It shouldn’t be ‘pot-luck’ when it comes to choosing a financial adviser, and we’ve seen that bigger isn’t always better; SJP made news headlines in relation to excessive fees and a lack of ongoing advice, while True Potential allowed clients to invest in unsuitable funds, claiming pensions transfers were carried out on a ‘non-advised’ basis.

However, while FCA regulation and enforcement certainly help, firms are still slipping through the cracks, and innocent investors are losing out financially. There are steps you can take to make a complaint about the service you have received and to claim compensation. We have a team of specialist lawyers who can help.”

TLW Solicitors has built up many years of experience in dealing with pension mis-selling claims. We’ve worked with clients who have:

  • Transferred out of a Defined Benefit pension into a personal pension or self-invested personal pension (SIPP).
  • Paid additional contributions to a free-standing pension rather than an employer’s pension.

Each scenario resulted in financial loss, anxiety and uncertainty.

When we take on your case, we examine the sales process, fees and charges, exit penalties and so on, and consider all potential options to recover your losses. It may be that we can:

  • Recover your lost pension funds.
  • Obtain compensation for financial losses suffered due to transferring to an ill-advised pension fund.
  • Get compensation for stress and inconvenience caused.

If you are concerned that you or a loved one were not given the right advice about a pension investment, please call us on 0800 169 5925 or fill in one of the forms below, and our team will contact you for an initial, no-obligation consultation. We work on a ‘no-win, no-fee’ basis, so you have nothing to lose.

It is important to get advice as soon as possible, as strict time limits can apply.

Minimum case values apply.

Meet Our Team

Meet Sarah, who heads up our experienced Investment Claims team.

Sarah and her colleagues are on hand to help with your claim.

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