On 26 March 2018, the FCA published Policy Statement 18/6: Advising on Pension Transfers (PS18/6). PS18/6 follows Consultation Paper 17/16: Advising on pension transfers and sets out final rule changes on advice given to consumers about converting or transferring safeguarded benefits. In light of this PS18/6 will primarily be of interest to firms advising on pension transfers, those acting as pension transfer specialists, software providers and pension providers, in particular those receiving pension transfer business.

The FCA has proceeded largely on the basis on which it consulted, with some refinements in places to reflect feedback and developments. In particular, it has decided not to proceed with its proposal on the ‘starting assumption’ on suitability. Given its concerns about the significant proportion of unsuitable advice the FCA has seen, the regulator does not consider it appropriate to change its assumption at the present time.

The new rules and guidance set out in the Appendix to PS18/6 include:

  • Personal recommendation: requiring all advice on pension transfers to be a personal recommendation;
  • Role of the pension transfer specialist (PTS): clarifying the role of a PTS when checking advice;
  • Analysis to support advice: replacing the current transfer value analysis (TVAS) requirement with the following: a requirement to undertake an ‘appropriate pension transfer analysis’ of the client’s options; and a prescribed transfer value comparator indicating the value of the benefits being given up and the cost of purchasing the same income in a defined contribution environment; and
  • Opt-outs: applying a consistent approach for pension opt-outs where there are potential safeguarded benefits.

Most of the final rules and guidance come into force on 1 April 2018.