The Financial Conduct Authority (FCA) made several proposals in a bid to shake up the scandal-hit defined benefit (DB) pension transfer market, including a ban on contingent charging.
But a recent survey shows that the advice industry does not look favourably on these suggestions.
Aegon’s Retirement Advice in the UK report, which surveyed 227 financial advisers, found 84% believe the FCA’s proposal to ban contingent charging will reduce access to advice.
This is a sharp rise from last year, where 67% said a ban would lead to a reduction in access to advice.
But it also found 56% think that contingent charging may lead to some firms giving unsuitable transfer advice.
Only 16% disagree with this and the rest are unsure (28%).
More detail needed
Steven Cameron, pensions director at Aegon, said: “The market is divided on whether or not contingent charging should be allowed for advice on transferring from a DB scheme.
“The overwhelming majority of advisers feel a ban will reduce access to advice.
“The issue is that some individuals aren’t able to pay upfront for advice and without the option of contingent charging, won’t seek it.
“Advisers also need more detail on how the ‘carve-outs’ from the ban will work.
“The FCA needs to frame these in a way that makes them sufficiently objective for advisers to use with confidence, without being unduly prescriptive.”
The FCA also proposed to introduce ‘abridge advice’, which allows advisers to offer a cost-effective service to quickly identify which individuals should not be considering a transfer.
Some (46%) of advisers agree that it will be effective, with a further third (35%) not sure and 19% disagreeing.
Advisers were also split on whether the abridged advice process will save enough time and money to appeal to customers.
Just over a third (36%) said it will and 38% said they are “unsure”.
Describing the reception from advisers as “tentative”, Cameron said it has “the potential to allow advisers to cost-effectively ‘filter out’ DB members not suited to transferring”.
“However, advisers remain hesitant that this new service with full factfind will save sufficient time and, hence, money to appeal to customers.”