Buck Bond Group

76% of firms may have provided potentially harmful defined benefit transfer advice, says FCA

Buck’s freedom of Information request uncovers the scale of the FCA’s concern

LONDON, January 27, 2020 – The Financial Conduct Authority (FCA) has concerns that 76% of firms with DB transfer advice permission in the market are providing potentially harmful advice to pension scheme members, according to a Freedom of Information (FOI) request submitted by Buck, a leading consulting, technology, and administration services firm specialising in pensions and employee benefits.

As part of its ongoing supervisory programme on DB pension transfer advice, the FCA carried out market-wide research in 2019. Due to its concerns, the FCA has confirmed it will write to 1,841 of the 2,426 advisory firms in the market whose DB pension transfer advice it examined to set out its expectations and the actions these firms should take.

The FCA’s investigation found that 69% of members who had asked for DB pensions advice had been recommended to transfer out of their DB pension schemes, a proportion that the FCA deemed higher than optimal for scheme members.

Buck’s FOI request also found that scheme members were more likely to be advised to transfer out of their DB schemes when they went to firms with fewer pension transfer specialists (PTS). Of the 1,454 firms that advised 75% or more of their clients to transfer, more than half (55%) had just one PTS employed.

Additionally, at firms where there was just one PTS, 74% of members who asked for advice were recommended a transfer. This figure was significantly higher than the 66% recorded at firms with multiple PTS. As such, Buck’s FOI request shows that the current system may be producing outcomes that are unlikely to be in the best interests of the majority scheme members. With many of these members switching from DB schemes to DC schemes, it’s likely they will be exposing themselves to investment and longevity risks which could impact their standard of living in retirement.

Mark van den Berghen, Principal and Senior Consulting Actuary at Buck, comments:
“This latest information from the FCA is alarming and should worry all involved – providers, advisers, and scheme members. If the FCA fears that the majority of firms advising on DB transfers are giving potentially harmful advice, there are some serious questions to be asked of the industry.

“There are independent financial advisers in the market who work to extremely high standards and invest a lot of time and money into ensuring their advice is both suitable and compliant, with the clients’ best interests at heart.

“However, there are also firms offering advice which results in poor outcomes for scheme members. The FCA has taken note of this and is working on behalf of scheme members. The fact that the FCA may ban contingent charging for DB schemes altogether is a sign of how serious the concerns are about the current process. Whatever solution the FCA adopts, we hope that it will improve the quality of advice being offered to scheme members.”

About Buck
Together with our clients, we’re defining the new social contract between employers and their employees, and trustees and members, to not only accommodate shifting expectations, but to stay ahead of them. Driven by best-in-class technology and leading analytics capabilities, our consulting solutions and easy-to-use administration platforms are helping the world’s most forward-thinking organisations re-envision and re-design the way people work and live. For more information, visit www.buck.com.

Media contact:
Rostrum
Patrick Davies
0203 404 7729
buck@rostrum.agency