On 30 March 2021, the FCA published Finalised Guidance 21/3: Advising on pension transfers (FG21/3).
Since the pension freedoms were introduced in April 2015, the FCA’s work on defined benefit (DB) transfer advice shows firms do not always provide the quality of advice that is required.
It remains the FCA’s view that it is in the best interest of most consumers to stay in their DB pension. Where an individual seeks advice to transfer, the FCA expects firms to give advice that is suitable and appropriate for their needs and situation. The purpose of FG21/3 is to help firms to identify any weaknesses in their existing processes so that they can put into place an appropriate framework for managing and delivering suitable advice. After reading FG21/3, some firms may need to make changes to their processes where their approach falls short of the standards set out in the guidance. The changes are likely to include the way in which firms:
- Collect information about their client’s circumstances to give suitable advice.
- Use the information they collect to assess whether a DB transfer is suitable.
- Communicate their advice effectively to consumers.
As FG21/3 is based on existing FCA rules, it comes into effect immediately.
The FCA expects firms to use FG21/3 to identify any weaknesses in their existing processes so they can put into place an appropriate framework for managing and delivering suitable advice on DB to defined contribution transfers.