On 4 October 2018, the FCA published Policy Statement 18/20: improving the quality of pension transfer advice – feedback on CP18/7 and final rules and guidance (PS18/20). In CP18/7 the FCA consulted on the following proposals:

  • amending the Pension Transfer Specialist (PTS) qualification and the exam qualification standards;
  • amending the definition of a pension transfer;
  • introducing guidance on how a PTS should work with another adviser in a two adviser model;
  • introducing guidance for firms on the advice boundary when providing triage services to prospective clients;
  • introducing guidance on assessing clients’ attitude to transfer risk;
  • introducing rules requiring firms to provide suitability reports when recommending that a transfer should not be made; and
  • amending the assumptions for valuing limited inflationary pension increases within a DB scheme.

The respondents to CP18/7 were largely supportive of the FCA’s proposals. The FCA is proceeding on the basis on which its consulted, except for the proposal to amend the pension transfer definition. The FCA reports that the issues raised during consultation showed that it had not achieved the simplification and clarity that it had intended. The FCA is using respondent feedback to help it investigate alternative ways to simplify and clarify the definition. While the FCA considers this issue further, it will retain the existing definition of a pension transfer. In practice, this means that the definition will continue to include some transfers of non-safeguarded benefits.

The guidance on two advisers working together and assessing attitude to transfer risk, as well as the requirement to prepare a suitability report in all circumstances come into force immediately. The perimeter guidance on triage comes into force on 1 January 2019. The changes to the pension increase assumptions come into force on 6 April 2019. The remaining changes, which cover the pension transfer specialist qualifications and appropriate exam standards will come into force on 1 October 2020. Firms affected by these changes will need to ensure that they comply by these dates.

The FCA also sought views – but did not propose rule changes – on charging structures for advising on pension transfers. A summary of the comments received are set out in chapter 5 of PS18/20. The FCA states that it is undertaking more work in this area and will consult on any new proposals in the first half of 2019.