New pensions advice rules that have been drawn up by the Financial Conduct Authority will see retirement savers get more protection from scams and unsuitable investments. The Financial Conduct Authority's new proposals are in response to the introduction in April 2015 of the government’s pension freedoms, which saw consumers given more freedom over what they could do with their pension pot. They are also following on from a report on pensions advice that was released by the FCA back in January which said:
"We are aware that some firms have been advising on pension transfers or switches without considering the assets in which their client's funds will be invested.
"We are concerned that consumers receiving this advice are at risk of transferring into unsuitable investments or – worse – being scammed."
The new set of proposals from the FCA include:
- The replacement of the current TVA (transfer value analysis) requirement with a comparison that shows the value of the benefits that are being given up.
- The introduction of a rule to require all advice to be provided as a personal recommendation that fully reflects the circumstances of the client and provides a recommended course of action.
- The updating of current Financial Conduct Authority Guidance on assessing suitability when giving a personal recommendation to transfer or convert safeguarded benefits. This will ensure that advisers focus on whether a particular transaction is right for the individual involved.
- The introduction of guidance on the role of a pension transfer specialist.
Christopher Woolard, executive director of strategy and competition at the FCA said:
"Defined Benefit pensions, and other safeguarded benefits such as guarantees, are valuable so most consumers will be best advised to keep them.
"However, we recognise that the environment has changed significantly, so we want to ensure that financial advice considers the customer's circumstances in full and recognises the various options now available to them.
"Our new approach should better equip advisers to give the right advice so that consumers make well informed decisions."
These measures from the Financial Conduct Authority come as it also investigates concerns that have been raised about the alleged misselling in the pension transfer market. It is thought that this investigation will involve up to 100 firms.