The Financial Conduct Authority (‘FCA’) has published new guidance to help consumers determine if they have received poor advice in relation to pension transfers.
The guidance concerns transfers from ‘Defined Benefit’ plans, sometimes known as final salary pensions, into ‘Defined Contribution’ pensions. There are various benefits that can be lost when transferring out of a Defined Benefit pension including a guaranteed lifetime income and options to take tax-free cash.
The FCA has highlighted matters that advisers should have considered before providing advice to transfer including:-
- The income needed in retirement to support yourself and any family members.
- Your entitlement to state pensions and benefits and current employment position.
- The state of your own, and as relevant your partner’s, health.
- Your attitude to risk when considering investing your pension funds.
The FCA has also highlighted indicators that you received poor advice such as:-
- The adviser failed to ensure you understood the respective risks and benefits of both Defined Benefit and Defined Contribution pension schemes.
- If your Defined Benefit pension was the only provision for your retirement with a guaranteed income
- The new scheme has charges which are more expensive than your Defined Benefit scheme
- Your pension funds have been invested in an unsuitable investment on the advice of your adviser such as store pods, overseas property, parking spaces or an otherwise alternative investment.
