FCA backs down from pension transfers advice ban

Plans to outlaw a controversial form of financial advice on pension transfers have been shelved by the Financial Conduct Authority (FCA).

The FCA warned earlier this year it was considering a ban on “contingent advice” where savers want help on whether to transfer benefits out of a final-salary pension scheme. With contingent advice, savers only pay fees for the service if they subsequently act on advice to transfer. That has sparked warnings that advisers may be encouraging people to move their pension rights inappropriately. A transfer is rarely a sensible option for a member of a final-salary pension fund, where benefits are guaranteed and can be difficult to match elsewhere.

Although the FCA said in March it was concerned the contingent advice model gave firms an incentive to recommend a minimum number of transfers each year, last week it said more analysis of the subject was needed and that it would consult further next year. The counter argument to the ban on contingent advice, acknowledged by the regulator earlier this year, is that while 100,000 transfers out of final-salary pensions are currently taking place each year, independent financial advice isn’t always easy to find. Any curb on the financial-advice sector could exacerbate this problem.