The decision by the Financial Conduct Authority to ban contingent charging on defined benefit (DB) pension transfers on 5 June was broadly welcomed.
But while UK-based firms are prohibited from charging a fee only when a transfer is made, the change does not extend to non-FCA regulated businesses or those based outside of the UK.
But individuals and firms who are not authorised by the UK watchdog should not be signing off DB pension transfers anyway, one advice firm boss said to International Adviser.
Lack of clarity
James Pearcy-Caldwell, chief executive of Aisa Group and an FCA-registered pension transfer specialist, flagged a paragraph on page 16 of the FCA policy document as particularly “confusing”.
It states: “Where investment advice on the proposed destination for the funds is given by an overseas firm, the ban applies to the charges levied by the UK firm giving the transfer advice and only to the overseas firm if it relies on FCA authorisation when it gives advice.
“But firms must provide a statement about the possibility of any additional charges in relation to advice given outside of the UK regulatory regime in the personalised charges document.”
Not far enough
“How is this to be interpreted?” asked Pearcy-Caldwell. “As surely any final salary transfer relies on FCA authorisation, and this suggests that the overseas firm cannot attribute contingent charging as a result.
“However, it then confusingly says the UK firm must highlight possible additional charges from the overseas firm.
“Overall, I don’t think that this paragraph goes far enough as there will undoubtedly be additional charges imposed by the overseas firm and, surely, they should be quantified as part of the UK advice, rather than a statement about the possibility of charges.”
He continued: “If the UK advice to transfer is robust but without stating exact overseas charges, what responsibility will the UK adviser have if things go awry as a result of poor/expensive advice given by the overseas firm, or if the overseas firm applies different charges after the event?”
