The Financial Conduct Authority have proposed stricter rules relating to pension transfers, primarily for transfers from DB to DC pension schemes.
The changes will be made to the “pension freedoms” introduced in 2015, which allowed people to cash in their pension pots, or transfer the money into other investments.
The changed that the watchdog has proposed are to replace the current transfer value analysis with a comparison, and provide transfer advice as a personal recommendation.
These changes will “soften the line on whether DB to DC transfers are a bad idea”. They “will no longer have to ‘assume’ that a transfer is unsuitable,” wrote former Pensions Minister Steve Webb on Twitter.
Executive Director of Strategy and Competition at the FCA, Christopher Woolard, said: “Defined benefit pensions, and other safeguarded benefits such as guarantees, are valuable so most consumers will be best advised to keep them. However, we recognise that the environment has changed significantly, so we want to ensure that financial advice considers the customer’s circumstances in full and recognises the various options now available to them.
“Our new approach should better equip advisers to give the right advice so that consumers make well-informed decisions.”
Philip Brown, Head of Policy at LV=, also commented on the changes: “The regulator’s proposed changes to pension transfer advice are welcome news for people approaching retirement. Since 2015, there has been a stark rise in the number of people wanting to transfer out of their defined benefit scheme to take advantage of the Freedom and Choice reforms. Therefore it’s vital there are strong safeguards in place to protect people from making choices without first understanding all the risks.
“We wholeheartedly agree advice on transfers should be a personal recommendation and strongly support changing how transfer values are presented. These changes should mean people aren’t unduly influenced into giving up valuable benefits and ensure they can have a safe and secure retirement.”