The UK financial regulator has proposed that advisers make personal recommendations to clients who transfer their pensions out of schemes where benefits are protected and into plans with no security.
The Financial Conduct Authority (FCA) also says a figure for the amount of benefits being given up when people transfer from protected pension schemes should be published.
Changes to advice over pension transfers are considered necessary after a rise in people giving up their protected benefits from defined benefit (DB) schemes and switching into defined contribution (DC) schemes, where benefits are not protected.
A mix of high transfer values and rule changes giving greater pension freedoms are behind the trend.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “Defined benefit pensions, and other safeguarded benefits such as guarantees, are valuable so most consumers will be best advised to keep them.
“However, we recognise that the environment has changed significantly, so we want to ensure that financial advice considers the customer’s circumstances in full and recognises the various options now available to them.”
Rachel Vahey, product technical manager at adviser platform Nucleus, said: “Every person’s circumstances are unique and advice has to be tailored for the individual, so it is good to see support for the move to make DB transfer advice a personal recommendation.”
Rachael Griffin, financial planning expert at Old Mutual Wealth, said: “[The] consultation paper from the Financial Conduct Authority takes an important step in modernising defined benefit transfer advice. Proposals include removing the starting assumption that a transfer is not suitable at outset and including graphics in comparison reports to make the potential cost of deciding to transfer abundantly clear to consumers.”
Old Mutual International recently highlighted the rise in transfers and warned advisers that transfers were not always suitable for clients.
The research also showed that some people transferred their DB pensions because they feared entitlements would be reduced as sponsoring employers wrestled with underfunding.
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