New pension transfer data – FCA's concerns remain
The FCA has published the results of data received from firms carrying out DB transfers and set out the next steps in its supervisory work.
On 19 June the FCA published data it had received from firms giving advice on DB pension transfers .
The information obtained seems to have only heightened the FCA's concerns about such business. In brief, 3,015 firms were surveyed of which 2,426 had provided advice on DB transfers between April 2015 and September 2018.
Of key concern to the FCA is that, of 234,951 customers receiving advice, 162,047 (69%) were advised to transfer. The FCA is concerned that this doesn't tally with their opening position, being that firms should begin from the assumption that a defined benefit pension transfer will not be in a client's best interest.
It should be stressed that the FCA has not assessed the actual advice given in respect of these transfers and its concerns are simply in respect of the raw data and how this tallies with the presumption of unsuitability. (For example, high levels of transfer recommendations may simply reflect a firm's effective triage of clients prior to the provision of full advice.)
Nevertheless, Dawn Butler (Executive Director of Supervision, Wholesale and Specialists of the FCA) has commented as follows:
"It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen."
This is perhaps a premature statement given that the advice itself has not been reviewed but nevertheless the FCA will now be ramping up its oversight of what is already a heavily supervised area. The FCA has already started visiting firms that are most active in this field and will be writing to firms where the potential for client harm has been identified from the data they have provided. It seems that that FCA is especially concerned about the 1,454 firms that have recommended transfers to 75% or more of clients.
What happens next will depend on what potential client harm the FCA ultimately identifies but it certainly seems possible that we could see further information requests and perhaps even s.166 reviews following this.