Pension Specialists and Financial Advisors are awaiting the final report and recommendations from the Financial Conduct Authority’s (FCA) consultation around Defined Benefit Pension Transfer, due this Autumn.    

The outlook for anyone looking to transfer a Defined Benefit Pension in the future is mixed. Whilst it looks like customers will be offered much more protection against rogue firms, it is almost certainly going to be harder to transfer a Defined Benefit Pension and it may become more expensive to do so, this is why….

FCA investigation into Defined Benefit Pension Transfers

The consultation comes after a sharp rise in the numbers of people transferring their Defined Benefit Pension. The increase of people wanting to move their Defined Benefit pension has been linked to a number of factors including historically high pension transfer values  as well as the closure of high profile pension schemes such as British Steel.

The FCA have stepped in, concerned by the actions of some Financial Advisors whose conduct has fallen well below the ethical standards expected of them.

Will Defined Benefit Pension Transfers be banned?

Whilst it seems unlikely that we will see new legislation regarding Defined Benefit Pension Transfer, the FCA are looking at a number of measures aimed at protecting people with Defined Benefit Pensions.

There is talk that the FCA will be raising qualification levels to require Pension Transfer Specialists to obtain the same qualification as an investment adviser but this has yet to be confirmed.

Raising Standards

It is likely that Advisors will also be required to clearly show that they have explored their client’s attitudes to the general risks associated with a transfer, in addition to their attitude to investment risks.

Initial Advice

Much like our free initial call and Definitive Guide to Defined Benefit Pension Transfer, under the new FCA guidelines it is likely that Firms will also be expected to carry out an appropriate ‘triage’ service (an initial conversation with potential customers), without stepping across the advice boundary, by providing generic, balanced information on the merits of pension transfers.

It is also likely that there will be a requirement for firms to provide a suitability report regardless of the outcome of advice.

The Definitive Guide to Final Salary Pension Transfer front page

Financial Advisors are now expected to supply generic information on Defined Benefit Pension Transfer to all potential clients as part of the transfer analysis process

Cost of Pension Transfers

The consultation has raised questions about whether it is right offering free advice or reports. Currently, at 2020 Financial we do not charge for the initial meetings and report, it is possible that in the future we will be forced to charge for these services regardless of whether or not a client proceeds with a transfer.

These reports are extensive and time-consuming and currently, not all firms are offering them as standard. The cost of creating these is likely to be borne by the customer.

What is the FCA saying so far?

Following a lengthy consultation, the FCA have already issued new rules and guidelines for Defined Benefit Pension Transfer advice which covers:

Personal recommendation

All advice on pension transfers must now be a personal recommendation. This means the advisor is responsible for the advice they give you. If you feel you have mis-advised you will have recourse through the Financial Ombudsman

Role of the pension transfer specialist (PTS)

clarifying the role of a PTS when checking advice. This will be aimed at firms who use a PTS to ‘sign off’ cases rather than speak to the client themselves and be involved in the advice process.

Analysis to support advice

Replacing the current transfer value analysis (TVAS) requirement with the following: a requirement to undertake an ‘appropriate pension transfer analysis’ (APTA) of the client’s options; and a prescribed Transfer Value Comparator (TVC) indicating the value of the benefits being given up and the cost of purchasing the same income in a Defined Contribution environment.  

This basically means that you will now be shown a realistic market comparison to help you understand the true value of the benefits you could be giving up.


Applying a consistent approach for pension opt-outs where there are potential safeguarded benefits. Advisors will be required to show consistency in their approach, not a square-peg round hole approach to push through transfers that otherwise don’t make sense.

Changes to the Industry

The FCA has already banned several firms, whose conduct was not meeting the expected standards, from carrying out Defined Benefit pension transfer.

The lengthy consultation by the FCA has made Public Indemnity Insurers serving the Financial Industry nervous, with several having pulled their cover for any firms conducting Defined Benefit Pension Transfer, effectively forcing many Financial Advisors out of the market. We have heard from several people who have struggled to find a Financial Advisor who can offer Defined Benefit Pension Transfer.

Another change being forced by the insurers is the withdrawal of one-off transactions that allow the customer to manage their own private pension pot moving forward. The insurers that are remaining in the Defined Benefit market have now made it a requirement that if a transfer is being recommended that the Financial Advisor must manage the funds on an ongoing basis. Whether this will change when the FCA clarify their position will remain to be seen.

Interim details of the Defined Benefit Pension Reform consultation can be found on the FCA website. The full report with recommendations is due in the Autumn.

Simon Garber, DIP PFS | Pension Transfer Specialist | Southampton

About the Author

Simon Garber DIP PFS is an Independent Financial Advisor and Qualified Pension Transfer Specialist. He is the Managing Director and Founder of 2020 Financial, based in Southampton, Hampshire. Simon specialises in Pensions and Retirement planning and is a later life planning specialist. He also holds qualifications in investment and life insurance and is a member of the Personal Finance Society and Chartered Insurance Institute.

Simon is passionate about providing the highest standards of customer care and transparency. 2020 Financial were awarded the Pension Gold Standard in 2019. You can find out more about Simon here.

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Final Salary Pension Transfer

If you’re considering a Final Salary Pension Transfer it is always worth seeking financial advice from a qualified Pension Transfer Specialist. If you don’t know where to start our Definitive Guide to Final Salary Pension Transfer should point you in the right direction

The Definitive Guide to Final Salary Pension Transfer front page

To review your situation and consider the ways we can to help you make the most of your retirement income, please contact us on 02380 981161 or send us an email at [email protected]

We look forward to hearing from you.

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It is important to understand that this blog does not constitute personal advice, nor should it be treated as such. It is provided for general information and we recommend speaking to an Independent Financial Advisor to discuss your personal situation

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