On 30 January 2025, the Financial Conduct Authority (FCA) published Evaluation Paper 25/1 (EP25/1), in which it shares the results and lessons learned from its ban on contingent charging and other remedies in the defined benefit (DB) transfer advice market in 2020.
Background
Through its investigation in consultation paper CP19/25, the FCA identified that the market for DB pension transfer advice was not delivering good outcomes for consumers. Many advisers were found to be providing poor advice, much of which was driven by conflicts of interest in the way they were remunerated, and the contingent charging structure (where advisers were only paid if clients transferred out of their DB pension schemes) were found to incentivise unsuitable transfers to defined contribution (DC) schemes. As a result of this, along with advisers’ behavioural biases, the FCA flagged that recommendations often did not serve consumers’ best interests.
In its policy statement PS20/6, published in June 2020, the FCA introduced a ban on contingent charging along with other remedies, to address the failures identified. The aim of these measures was to reduce harm to consumers from unsuitable advice and poor value.
EP25/1
In EP25/1, the FCA assesses the effect of the interventions on market structure, pricing, and the uptake of advice. It does not comprehensively evaluate the ban’s impact on the suitability of advice, noting that this is difficult and costly to measure. However, the FCA explains that there is still merit in analysing the available data to explore what has occurred in the market. It sets out its methodology, results and lessons learned from the evaluation in EP25/1 and accompanying technical annex.
Next steps
The FCA is inviting views on EP25/1. There is no specified deadline for the submission of comments.