The FCA has published Thematic Review 14/12: Enhanced transfer value pension transfers.

In TR14/12, the FCA reviews the suitability of bulk pension transfer advice provided by financial advisers where employers offer an enhancement to the transfer value (ETV).

The FCA appointed an independent consultant to review a sample of 300 case files from a significant proportion of the firms known to have provided bulk ETV pension transfer advice in the period from 2008 to 2012. The review assessed:

• whether the recommendation provided, and the advice process that the member was put through, resulted in a suitable outcome in the member’s individual circumstances (suitability); and
• whether the disclosure process (that is, the way the financial adviser communicated with the member), was followed appropriately relative to the guidance in place at the time, whether the appropriate rules had been followed, and whether the information provided to the member was clear, fair and not misleading, such that the member could make an informed decision about their options in relation to the ETV offer.

The review’s main findings were that:

• there was a large variance in advice approaches and in the quality of advice provided by financial advisers. However, in about one third of the files reviewed, financial advisers appear to have provided ETV pension transfer advice without complying with the requirements and guidance in force at the time; and
• financial advisers frequently failed to meet the FCA’s disclosure requirements. The main underlying causes of disclosure failings appeared to be the use of a rigid advice process that did not always allow for consideration of individual member circumstances or information needs, and the absence of clear contemporaneous records.

Those financial advisory firms that have given the FCA cause for concern have been asked to review their practices and consider the FCA Handbook requirements again with a view to putting things right for those consumers adversely affected.

View TR14/12: Enhanced transfer value pension transfers, 21 July 2014