The FCA has started consulting on proposed amendments, which will be necessary following changes to the Financial Services and Markets Act 2000 legislation.
The FCA said this week: “We propose to amend our rules to incorporate the new specified activity of advising on conversions or transfers of safeguarded benefits to flexible benefits, and require that all advice on DB to DC pension transfers be provided or checked by a Pension Transfer Specialist.”
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The Government’s new flexible pension regime will make advising on pension transfers “significantly more complex”, the regulator admitted.
It stated: “So we now wish to require the Pension Transfer Specialist qualification for advice on all transfers from DB schemes to DC arrangements, regardless of when the transferred benefits are being crystallised.”
Claire Trott, head of pensions technical at Talbot and Muir, said: “Overall the changes are positive but as with all these things, they will lead to a complexity for the client who may chose an adviser who they believe will be able to help them, then discover that their benefits fall into the category of safeguarded benefits and they will have to find another.
“This could lead to further up skilling in the industry or a collaboration of advisers who those not qualified can outsource to. I have already heard from some advisers who offer this service becoming increasing busy this year.”
She said: “We welcome the need for a pension transfer specialist to be involved where there is advice given on safe guarded benefits, even if they are for immediate vesting. It makes sense that just because there is no on-going growth or accrual to take account of the style of the benefits can be so different that it needs a specialist to assess the implications for the client.”
The clarity from the FCA was useful, although it would have been helpful to have the policy statement before the pension reforms came into force, she said.
Ms Trott also believes the FCA’s proposal to remove the need for a pension transfer specialist to be involved in transactions away from guaranteed annuity rates is sensible.
She said: “They do not have the same complexities that some other safeguarded benefits would have, such as a defined benefit scheme. The calculation of what would be lost is much simpler and often is only available at a set point in time such as age 60 or 65, so it can be explained to the client relatively easily.”