Pension transfer policy statement PS20/6 - a quick summary

Commenting on today’s FCA policy statement on contingent charging, Justin Corliss, Senior Pensions Development and Technical Manager said: 

“The FCA’s decision to ban contingent charging except in exceptional circumstances does not come as a surprise even though there is no real evidence that it leads to poor outcomes. To mitigate the impact, the FCA has chosen to move forward with abridged advice as it feels this will be a good low cost solution for many people. The exceptions to the contingent charging ban, the “carve-out”, will only cover a minority of cases. Some people will still be left without access to affordable advice, but there is a feeling that this is the lesser of two evils. What is surprising though is that few stipulations have been made regarding ongoing adviser charges even though this is also a potential conflict of interest.”

A brief summary of the key points

In an unusual move, this policy statement is accompanied by a guidance paper (GC20/1), outlining good and bad practice in the advice market.

The policy statement confirms the FCA will go ahead with most of the proposals in the consultation paper which are aimed at improving the quality of advice and protecting consumers. Perhaps the most high profile of these is a ban on contingent charging to take effect from 1 October 2020.

This is the date many of the proposed changes come into force, and in many cases is an extension to the implementation period initially put on hold due to COVID-19.

Other significant changes confirmed include:

• The introduction of abridged advice.
• A requirement for advisers to disclose charges and to undertake checks to confirm the client’s understanding during the advice process.
• Pension transfer specialists (PTS) to undertake an additional 15 hours CPD per year specific to pension transfer advice, in addition to their existing requirement. At least 5 of the 15 hours must be provided by an independent provider external to any firm that employs or contracts services from the PTS.
• A requirement for advisers to consider the workplace pension (if available) as a destination for the transferred funds, and to demonstrate why any alternative solution is more suitable.

Find out more

You can download a copy of the policy statement from the FCA website.