You'd be forgiven for choosing to ignore the FCA's recent consultation paper on pension transfer advice, and its seeming emphasis on advice relating to defined benefit (DB) transfers.

    If DB transfers isn't an area you usually get involved in, reading it may have seemed like a solid few hours you wouldn’t get back. 

    Well, I did read it and there was one part that set off my spidey senses, which keenly detect situations that may create more work for me.

    The DB market is the current focus for the FCA, but it stands to reason that what it sees as suitable for that aspect of advice may eventually bleed into the wider pension transfer market and beyond.

    So these papers are often a good indicator of the future.

    The main area I think will affect all of us is the FCA's focus on eliminating other options when considering a pension transfer.

    A few years ago, the emphasis was on stating the reason why a stakeholder was not appropriate for a transfer.

    At the same time, firms also tended to discount the client’s workplace pension and alternative pension contracts.

    As a reminder, pension business is the only area of advice where you are encouraged to state the reasons why something is not suitable, as well as why it is.

    The pension transfer advice consultation goes a bit further, setting its sights on workplace pensions. 

    It infers you should no longer simply pay lip service to discounting a workplace pension as a suitable place for pension transfer monies.

    You can no longer use generic terms such as ‘limited fund range’ or ‘restrictive retirement options’ as your rationale for recommending other schemes - and may God have mercy on your soul if you say a workplace pension scheme isn't suitable because it ‘does not allow adviser charging.’

    Now it is proposed that a cost comparison must be completed, showing the cost a client would pay if they moved funds into the workplace pension against the recommended pension.

    If there is an increase in costs for the recommended pension, then a full explanation should be given to justify this.

    This must then be signed by the client as part of a new, multi-signature page which shows the client understands a variety of things around the transfer, including costs, the recommendation, the transfer risk warning and the ongoing advice service.

    Each element must be signed.

    So you may be left thinking one additional page doesn't really equate to that much extra work.

    But where I foresee issues is firstly getting the necessary data from the client to determine whether the workplace pension is suitable for the transfer, and secondly doing all the additional analysis.

    Obtaining authority on workplace pensions can be tricky, and getting transparent charges information even trickier.

    Once completed, advisers could look at a scheme and see immediately it would not be suitable to receive £2m in DB monies. But beforehand, it can't be assumed, and should be built in as an option to your cashflow.

    You'll also need to obtain projections or calculate reduction in yields and ensure all analysis is clear and transparently provided to the client.

    As I said at the outset, this is not yet a requirement for all pensions, but I have a feeling it might be at some point.

    And, as with all things from FCA papers, it might be best to get ahead of the curve and start working on it sooner rather than later.

    Making friends with group pension administration teams now may well be a good investment for the future.

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