The Financial Conduct Authority’s (FCA) changes to the defined benefit (DB) pension transfer sector have caused a stir and a recent survey has found advisers are sceptical if they will even improve the market.
Prudential UK has polled over 1,000 advisers just days after the FCA’s latest policy statement on DB transfers was released, which saw the banning of contingent charging among other measures designed to protect pension savers.
It found over two-thirds (68%) of advisers either don’t believe or are unsure that the ban on contingent charging will lead to better outcomes in general.
This comes after James Pearcy-Caldwell, chief executive of Aisa Group, told International Adviser that elements of the DB transfer contingent charging ban were ‘confusing’.
Future business
Prudential also asked advisers about how the final policy statement will affect their DB business.
Some 58% think that they will do less or stop doing DB business altogether, while only 3% said they will do more.
Nearly two-thirds (62%) of advisers said they don’t believe or are unsure that DB transfer advice can be profitable going forward.
Alongside the ban on contingent charging, the FCA said that over 700 firms had given up their permission to provide pension transfer advice.
Prudential UK was also keen to understand how advisers DB business had evolved since the FCA launched its consultation on DB transfers in August 2019.
Some 12% said they were involved but have since withdrawn from the DB market, over a third (35%) say they are doing less and 43% say that they are doing either the same or more.
Changing models
Les Cameron, head of technical at Prudential UK, said: “There’s a lot of detail in the statement for advisers to digest and changes needed to their processes if they want to remain in the DB market.
“Looking at their charging models is central, but advisers also need to consider other crucial items such as whether they will offer abridged advice and if they are satisfactorily covering the option of a transfer to a workplace pension scheme, if available.
“They should also consider the read across to other areas of advice, such as pension switching, especially around workplace pension scheme availability.
“Advisers haven’t got long to consider these changes. The new rules take effect from 1 October, and even if the advice process is started before this, the personal recommendation must be made by 1 January, which could, in some cases, be a stretch.
“While the guidance consultation was in response to the defined benefit work, a lot of the paper’s content can be applied generally to all areas of advice and advisers should consider it in a wider context.”
