The Financial Conduct Authority (FCA) has proposed a ban on contingent charging for pension transfer advice.
The watchdog has this week launched a consultation which sets out proposed measures to change how advisers manage and deliver pension transfer advice, particularly for defined benefit (DB) to defined contribution (DC) transfers.
The FCA proposes to ban contingent charging, which is the practice where the consumer only pays for advice if they elect to transfer. The regulator is concerned that this creates a conflict of interest between the adviser and consumer and means that some consumers may be advised to transfer when it is not in their best interests.
It is also concerned that too many advisers are delivering poor advice, much of it driven by conflicts of interest in the way they are remunerated.
The FCA is consulting on the following proposals:
Financial advice group LEBC has welcomed the ban and said it has also been campaigning to outlaw this practice.
Kay Ingram, director of public policy, at LEBC Group said: “Those who opposed the ban have said that it could cause hardship to those who cannot genuinely afford to pay for advice. We have always believed that other solutions could be found for that minority of cases where a transfer is in the interests of the consumer - and we feel that the FCA has risen to this challenge by creating exceptions for those with severe debt or health problems.
“We would also like to see greater use of tax-free employer sponsored advice and the compulsion of pension providers to facilitate the payment of the pensions advice allowance, which they have been slow to adopt voluntarily.”