A new study showed 7 in 10 advisers, who are or have been active in advising on defined benefits and potential transfers, think the labyrinthine rules impact their likelihood of providing advice in this area.
The FCA updated its expectations for advice with new regulations introduced last year.
However, a strongly worded update on a targeted suitability review highlighted weaknesses it continued to find amongst some adviser firms, leaving many advisers with concerns that the regulations may not be completely clear and could be subject to different future interpretations.
Advisers’ feedback indicated that they wanted to be more confident that the advice they provided was fully in line with the regulator’s expectations and would not leave them open to any retrospective challenges.
Misgivings about regulatory interpretations were having an impact on the defined benefit advice market, with three quarters (75%) of advisers saying it was not currently working as well as it could in meeting the needs of consumers.
Aegon says that while for most people, remaining in their defined benefit scheme would be the best option, this is not the case for everyone and it was “essential that those wishing to review their options have access to advice”.
The firm said it was highlighting concerns that “without a sufficient supply of advice to meet consumer demand, the advice market just isn’t effective – something that regulators, politicians and the industry shouldn’t find acceptable”.
Steven Cameron, pensions director at Aegon, said: “Everyone accepts that advice on defined benefits is a highly complex area.
“Where consensus is harder to reach is exactly how the FCA’s updated regulations and suitability review comments should be interpreted.
“Previous and ongoing reviews of suitability from the FCA shows defined benefit advice remains under intense regulatory scrutiny.
“FCA strongly worded feedback provides further detail on ongoing weaknesses with some firms’ advice.
“Advisers clearly want as much regulatory certainty as possible and while regulations and updates are helpful, the greater the volume, the more complex it can be to be confident in interpretation.”
He added: “Aegon believes most people will be better off staying in their defined benefit scheme, but it is imperative that those wishing to review their options have access to advice.
“This means any further reduction in the supply of advice will be to the detriment of consumers.
“While advisers face other challenges, such as obtaining Professional Indemnity Insurance, we’re keen to address concerns over complexity of regulations.”