Bygone era
Andy Bell, chief executive of AJ Bell, welcomed the decision on starting assumptions, saying that the current view that DB transfers will be unsuitable is “from a bygone era and does not reflect reality”.
“The removal of this starting assumption would therefore be a positive development and it is right that advisers should assume a neutral starting position.
“Whilst it is good that the consultation will be reviewing the TVAS process, it appears that the proposed transfer value comparator (TVC) shares the same flaw as the current transfer value analysis (TVA). They put annuity rates at their heart, when annuities are wholly irrelevant, unless someone wants to take a transfer value now and then buy an annuity at the point of retirement, which would be perverse.
“The analysis needs to reflect the substance of the transaction in hand. Our preference would be to project the income that can be generated from the transfer value from normal retirement age, using sensible growth rates and a standard table of sustainable income drawdown rates and then compare this level of income with that being foregone.”
Crosshairs
Pension transfers have been in the FCA’s crosshairs for a while, with the regulator stepping in to stop companies from processing pension transfers.
Section 166 orders have been handed out to deVere UK and Intelligent Pensions, which prevent the firms from carrying out pension transfers until an independent skilled person conducts a review of the business.
The FCA can also hand out section 55L of the Financial Services and Markets Act (FSMA), which it did to Holborn Assets in March.
The regulator stopped UK IFA firm Strategic Wealth from providing pension advice in early June as part of its clampdown but did not cite specific regulations in doing so.
