1. Defined benefit pension transfers – An update from the FCA
The Insurance Institute of Sheffield
Retirement and Investment Conference
20th September 2018

2. Learning objectives To:
understand the FCA’s current supervisory approach to DB pension transfer advice.
gain clarity on the key risks the FCA sees regarding DB pension transfer advice.
understand the FCA’s expectations of firms that operate within the DB pension transfer market.

3. Agenda The current environment Expectations Supervisory work
Thematic reviews
BSPS
Policy update
PS18/6
CP18/7

4. Pensions environment Pension freedoms Economic drivers
Employer promoted transfers
Statutory advice requirement

5. Consumer behaviour Inherent biases Needs and Objectives Peer pressure
Vulnerability to scams

6. Our expectations Transfer usually irreversible Informed client
Role of Critical Yield
Consider:
Needs & Objectives
Income need
Receiving scheme
Way funds will be accessed
Alternative ways of achieving objectives

7. Thematic work Review changes in firms’ approach and practices
Monitoring market since 2015
Identified firms increasing activity – 22 assessed
File reviews for 13 firms and firm visits to 12
Serious concerns with half of the firms
Four firms have chosen to stop advising
Additionally our separate work on pension scams led to over 30 firms limiting pension transfer activity

8. Suitability findings from thematic work
DB transfer file review outcomes – significantly fewer suitable cases, and very poor disclosure findings.
Suitability
47% of transfer recommendations suitable
35% of receiving product/funds suitable
Reasons for unsuitability
Lack of sufficient ‘know your customer’ information
Not considering clients needs as well as stated objectives
Not assessing risk adequately
Not providing accurate comparisons between the DB scheme and the recommended scheme

9. Scams Pensions are being targeted by fraudsters
Tackling this is an FCA key priority
We work with other agencies in a joined up approach
Supervision of authorised firms
Action on unauthorised firms
Evolution of scams
Role of the sector
Consumer education - Scamsmart

10. British Steel Pension Scheme
We have carried out:
4 seminars
14 firm visits (12 desk based reviews)
172 file reviews
34% unsuitable
10% failed to demonstrate suitability
13 firms have stopped advising on DB transfers
Whistleblowing/intelligence

11. A balanced approach
Sometimes we saw advisers failing to communicate about the advantages and disadvantages in a balanced way
Client’s ability to manage large sums of money throughout retirement, charges and fees for advice
Death benefits – most people need their pension for income
Prioritisation

12. Business Models Specialist business model
Relationship with introducing adviser
Lack of information about clients
Not aware of ultimate investment
TVA based on default schemes and funds
Inadequate resources
Other firms providing advice
Large local schemes
Business planning and inadequate resources

13. Policy Statement on Pension Transfers - PS18/6
Good response to consultation CP17/16
We will proceed with most proposals with some refinements:
Personal recommendation
APTA/TVC with some clarification
Role of PTS with clarifications
Maintaining starting assumption on suitability
Most changes apply from 1 April, APTA from 1 October

14. Further consultation – CP18/7
Reflected feedback to CP17/16 discussion questions
Consulted on several areas:
Raising qualification level for PTS (Level 4)
Clarifying clients’ attitude to risk
How to carry out an appropriate ‘triage’ service
PTS and the two adviser model
Policy Statement due in next few weeks

15. Charging models A discussion chapter in CP18/7 to gather views on:
Impact of a contingent charging ban.
How could a ban be implemented?
What would be the effect of banning some charging models?
Complex area – protect consumers/access to advice
FOS/PI insures also focused on this area

16. Key takeaways & next steps
Needs & objectives
Balanced approach
Whistleblowing
Next Steps
Implementation of Policy Statement
Further thematic reviews
Policy Statement due

17. Learning outcomes
To:
understand the FCA’s current supervisory approach to DB pension transfer advice.
gain clarity on the key risks the FCA sees regarding DB pension transfer advice.
understand the FCA’s expectations of firms that operate within the DB pension transfer market.

18. Questions …