FCA confirms final rules on pension transfer advice

The Financial Conduct Authority (“FCA”) has published feedback and final rules and guidance following its consultation on improving the quality of pension transfer advice.

The FCA Policy Statement, (PS18/20) contains the new rules aimed at improving the advice people receive when considering transferring their pension. PS18/20 confirms that the FCA is taking forward most of the proposals put forward from its consultation in March 2018, which mainly related to transfers from defined benefit (DB) to defined contribution (DC) pension schemes. The consultation proposed further changes to rules and guidance on advising on transferring from safeguarded benefit schemes (where there is some form of guarantee or promise about the rate of secure pension income that the member will receive, or will have an option to receive).

The 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 our 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; and
  • 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 has also published a timeline of when these changes are to be implemented and by when firms will have had to adapt their practices.

These are as follows:

Change Date FCA Publication
Introduction of APTA and TVC 1 October 2018 PS18/6
Suitability Reports for all advice 4 October 2018 PS18/20
Guidance on assessing attitude to transfer risk 4 October 2018 PS18/20
Guidance on working with another adviser 4 October 2018 PS18/20
Perimeter guidance on triage services 1 January 2019 PS18/20
Updated assumptions to use when revaluing benefits 6 April 2019 PS18/6
Update pension increase assumptions 6 April 2019 PS18/20
New qualification requirements 1 October 2020 PS18/20