Changes in Defined Benefit Pension Scheme Transfer Advice: What You Need To Know.
The United Kingdom’s Financial Conduct Authority (FCA) has reaffirmed their stance regarding Defined Benefit pension scheme transfer advice. The FCA is maintaining the requirement of Defined Benefit pension scheme members to receive financial advice from a UK regulated Independent Financial Adviser for transfers of funds over £30,000. As well the FCA is maintaining the position that advisers should begin with the assumption that pension transfers will be unsuitable and not in the best interest of clients.
Alongside these decisions, the FCA has introduced several new rules concerning the transfers. For clients, this means a requirement to obtain personal transfer advice and recommendations that account for individual circumstances. Including a personalised analysis of options and a comparison to show the value of the benefits being given up.
The tightening of the pension transfer process was done in part as an attempt to reduce the risk of scams and mis-selling of funds and follows a review by the FCA of numerous firms and advisors that offer Defined Benefit transfer advice. Although these changes are intended to reduce the risk to clients, it has, in turn, made the transfer process longer and more difficult for clients.
Furthermore, due to these changes that have been occurring around pension scheme transfer advice, and the increased FCA scrutiny advisors are under, some advisors are ceasing to offer pension transfer advice. This has led to a shortage of pension transfer specialist advisors, with the demand for advice, particularly in the case of more complex transfers into overseas pensions, exceeding the current supply.
This growth in the pension transfer business along with contingent charging strategies had seen some firms defaulting to a commoditised and industrialised process of giving advice by firms to clients. This approach is not considered adequate by the FCA.
With these changes occurring in the area of Defined Benefit pension scheme transfer related advice, it may feel as though it is becoming increasingly difficult to find a UK advisor who will provide the service you require and to complete your pension transfer.
The Ranfurly Superannuation Scheme has a UK pension specialist who can assist you through the transfer process, prepare transfer forms, obtain the required UK and NZ advice and provide the solutions you need. Please contact us to inquire about the transfer process.