The regulator should begin its consultation on defined benefit (DB) transfers “urgently” to avoid potential consumer detriment, Aegon pensions director Steven Cameron has urged.
The Financial Conduct Authority (FCA) today confirmed it would publish a consultation paper on advice and ‘safeguarded benefits’, which includes DB transfers, and Cameron (pictured) said clients could suffer consumer detriment if advisers did not transfer out of fear of a regulatory backlash.
He argued there was a risk the current high transfer values, which have come about as a result of low interest rates, would fall when interest rates do start to rise.
An FCA spokesperson said the consultation paper would be published “in due course” but was unable to confirm a specific date.
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Cameron said: “The mission statement sets out very clearly how the regulator prioritises its activities. Part of this is where it looks at areas that risk customer detriment and where regulation would have the greatest positive impact. I think DB to DC [defined contribution] transfers score very highly on both of these criteria.”
The additional time pressure of volatile transfer values, along with increased demand for transfers from consumers since pension freedoms, meant it was “essential advisers can have confidence they are meeting FCA expectations”, he said.
He added: “Advisers face real challenges if they ‘put off’ advice only to find transfer values decline. Of course, for many people, remaining within their DB scheme will remain the best option.”
Guidance consultation
The regulator first shared its plans for the DB consultation on 11 April, in its guidance consultation on streamlined advice services.
It offered narrower scope as to what ‘streamlined advice’ might include for firms but also warned they should still obtain “all the essential facts” in order to ensure a suitable recommendation.
The consultation provided examples as to when streamlined advice would and would not be suitable, including in the cases of pension accumulation and decumulation.
In the accumulation example, however, the regulator pointed out this involved DC to DB transfers and not – currently – DB to DC. It said where the transfer of ‘safeguarded benefits’ – those with guaranteed annuity rates – are included “there are additional considerations to take into account”.
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