DEFINED BENEFIT ADVICE UPDATE

FCA issues policy paper PS18/20

The Financial Conduct Authority (FCA) has issued PS18/20 – which builds on PS18/6 issued in March 2018 – and sets out its final rules on advice relating to transfers out of defined benefit (DB) schemes. This is the outcome of its March 2018 consultation triggered by CP18/7.

The latest new rules and guidance include:

  • Raising qualification levels for pension transfer specialists (PTSs) to require them to obtain the same qualification as an investment adviser alongside the existing PTS qualification.
  • Guidance to clarify FCA expectations that advisers should be exploring clients' attitudes to the general risks associated with a transfer, in addition to their attitude to investment risks.
  • Guidance to illustrate how firms can carry out an appropriate 'triage' service (an initial conversation with potential customers), without stepping across the advice boundary, by providing generic, balanced information on the merits of pension transfers.
  • A requirement for firms to provide a suitability report regardless of the outcome of advice.
  • Updating the assumptions to be made when valuing increases applied to DB scheme benefits, where there are upper and lower limits applying to inflationary pension increases.

The FCA isn't proceeding with its proposal to amend the definition of a pension transfer.

In March, the FCA also raised the question of contingent charging for DB advice. It now confirms that while there’s no immediate ban, it is conducting further analysis. If the FCA considers that changes to charging structures are appropriate, it will issue a new consultation in the first half of 2019.

15 October 2018

Final rules on advice relating to transfers out of defined benefit schemes