Improving the quality of pensions transfer advice

The FCA has produced their latest updates PS18/20. Here are our thoughts (to save you reading the whole paper!).


If you didn’t know already, the FCA had talked about making some changes to the Pension Transfer Specialists qualification. For advisers who only hold the PTS qualification, the FCA have requested that the level 4 investment qualification is achieved by 1st October 2020. The FCA accept that there is some overlap in the knowledge already held and they have allowed 2 years to achieve level 4 status. The consultation stopped short on restricting PTS to Charter Advisers only, thankfully!

There is no automatic transition period. This means that if you want to continue to practice as a PTS after this date, then you must have achieved the investment qualification.

The FCA is also looking to ensure the PTS has sufficient knowledge and remain competent for their role, this will be done with additional CPD. They are still considering what additional level of CPD will be required but ensure you have sufficient relevant CPD within your 35 hrs.

For the adviser who currently do not hold PTS status, the rules will remain the same and can continue to provide pension transfer advice, as long as their advice is checked by the PTS before the client is given a suitability report.


The paper outland the requirements on Triage and how the FCA are concerned that some conversations have been falling more into personal recommendations rather than generic information.

This is what the FCA had to say regarding triage:

“Where a reasonable observer would view the adviser as presenting a recommendation as suitable for the customer or based on consideration of their circumstances, then this must be treated as a personal recommendation – we cannot exercise discretion on this”.

The FCA has said that there are only two ways the advice will go: to transfer out or not to transfer out (that is the question. Everyone loves a Shakespeare reference!).

If you give your client anything that would persuade them or make their opinions shift more one way than the other, then this is likely to be advice and therefore not triage. So, you need to be providing your client with information in an educational and a balanced way.

Some have been talking about using the TVC in their triage service, but the FCA has been quick to shut that down. They said that the TVC cannot be used in the triage process as this produces a comparison of the value that they have been offered by their scheme and the estimated cost of purchasing the same benefits in a DC scheme. Therefore, it is likely to influence the customer’s decision to keep or give up safeguarded benefits.

Contingent Charges

The largest part of the report was taken up with the hot topic of Contingent charges. There were some calls for scrapping this as some felt it could be a conflict of interest, whilst the opponents who wanted to keep this were worried about the availability of advice in the future. The report took the stance that the FCA would do further work to determine if there is a need for intervention because of the significance of this issue to all stakeholders in the market.

There has been a lot of controversy over this decision by the FCA on top of everyone’s opinions about whether or not it should be banned but the FCA stated that the initial analysis had shown contingent charging was not the main driver of poor outcomes for customers. There is no denying that there is a conflict of interest there that needs to be dealt with. Keep an eye out for the next update as the FCA have stated that they will consider the points raised and if they think changes are appropriate, they will comment on any new proposals in the first half of 2019.

We hope that whatever the final outcome is, it is in the best interest of the client.

Two-Adviser Model

When a firm operates a two-adviser model, the firm should make this arrangement clear to the client. The client should be able to understand the separate roles of the two advisers as well as their respective charging structures.

The rules do not prevent two separate advisers providing the pension transfer advice and the advice on the proposed receiving scheme and its investments. However, the FCA expects that the two advisers to work with the same information about the client and have in place robust processes to ensure that this.

To avoid a bun fight amongst the two advisers as to who said what, the Ombudsman will assess the responsibilities of each party and consider the respective work each has undertaken. This may include looking at any contracts that have been put in place between the advisers so be careful, good due diligence is needed here.


Self-investors are clients who choose their own proposed scheme and investments, often as part of a plan to consolidate their pension arrangements.

FCA expectations:

  • Expect advisers advising on a pension transfer to consider the proposed destination of the funds. The situation when the client puts forwards the destination themselves is no different, except that the adviser will have to make clear that the client needs to provide the necessary information about the scheme and its underlying investments.
  • Where a transfer is unsuitable in principle, but not specifically because of the proposed destination, the adviser should explain the basis for the recommendation. Where the transfer is unsuitable because of the destination, then the adviser should explain that the transfer may be suitable for the client selects a different destination for the funds.

So, you need to decide if this is something you will or will not be willing to do. If you decide that this is your thing, then ensure the rules are followed and that you can ensure the suitability of the client’s requirements.

Assessing a client’s attitude to transfer risk

Assessing transfer risk is part of the advisory process of getting to know the client, and understating their preferences and financial behaviour. The clients’ need to be told about longevity risk and investment risk but also the risk of losing the safeguards that currently exist. The need for flexible access to the capital should be clearly compared to the risk that they are taking from giving up secured benefits and evidenced to show that the client has understood this.

Negative recommendations

The FCA has stated that a report should always be given where the client is advised not to transfer. The suitability report should provide a lasting record of why remaining in a safeguarded benefits scheme is the most suitable outcome for the client.  Don’t forget, the report will also provide the adviser with a record which should help them if there is a future dispute.

This is not something should be a shock to you. It has always been considered that a recommendation on any format is still advice and therefore to protect the client and adviser, a report is produced.

If you want to read the policy statement, then you can locate it here:

Overall there was nothing particularly surprising in this paper; in fact, we’d discussed the majority of these topics in our webinar in a few days before (we must have a crystal ball in house in Apricity!).