In a further attempt to mitigate the impact of the ban on contingent charging on the advice process, the FCA have introduced a new shortened form of pension transfer advice, abridged advice.
Abridged advice will still need to be provided or checked by a Pension Transfer Specialist (PTS), and that PTS will need to provide a suitability report if the recommendation is not to transfer. This short form of advice enables the adviser to:
- Provide the consumer with a recommendation not to transfer.
- Tell the consumer it’s unclear from the information available in the abridged advice process, whether they would benefit from a transfer.
The aim is that abridged advice will be a low cost solution, and advisers are able to provide this form of advice free of charge if they wish. Furthermore, if a client is charged for abridged advice and then proceeds to full advice with that firm, the abridged advice charge is deducted from the full advice charge to ensure clients aren’t charged for the same piece of work twice.
The abridged advice process will include a full fact find and risk assessment for the client, and in a change from the initial proposal in the consultation paper, can involve the adviser collecting further information on the ceding scheme.
So abridged advice will consider the risks involved in staying in the scheme and the risks to transferring and losing safeguarded benefits. Abridged advice could be an effective means of identifying those eligible for the carve-out.
However, the adviser can't produce an appropriate pension transfer analysis (APTA), transfer value comparator (TVC) or consider the consumer’s proposed receiving scheme. If any of these activities are undertaken, it would constitute full advice which would have to be charged for accordingly.
It’s also worth noting that abridged advice doesn't satisfy the requirement to take advice before transferring benefits. So abridged advice alone won't be sufficient for the same or another regulated firm to arrange a transfer for the client. Full advice is required for this.
The regulator says they expect that when abridged advice results in an unclear outcome and the client proceeds to full advice, this will still result in some recommendations not to transfer.