The FCA will require that all pension transfer specialists will be required to hold a 'specific qualification' on providing pension transfer advice on investments by October 2020.
The FCA says there will be no immediate ban on contingent charging - where an advice fee is only paid when a pension transfer goes ahead. However contingent charging will be kept under review.
Risk assessment will be a key part of the new rules.
The regulator says that the new rules are “aimed at improving the advice people receive when considering transferring their pension.”
A policy statement confirms that the FCA is taking forward most of the proposals put forward for consultation in March 2018, which mainly related to transfers from defined benefit (DB) to defined contribution (DC) pension schemes.
The consultation proposed further changes to its rules and guidance on advising on transferring from safeguarded benefit schemes where there is some form of guarantee or promise about pension income.
The changes include a requirement for all pension transfer specialists to hold a specific qualification for providing advice on investments by October 2020, enabling advisers to identify whether a proposed pension scheme and investment solution is consistent with the client’s needs and objectives.
The FCA also expects advisers to consider their client’s attitude to, and understanding of, the risks of giving up safeguarded benefits for flexible benefits. These new rules should improve the advice that people get when considering transferring their pension, including as a result of the pension freedoms, says the watchdog.
As part of the consultation, the FCA says it also sought views on whether to intervene in charging structures. This could include banning contingent charging, which is when a fee for advice is only paid when a transfer goes ahead. It also asked about the impact on access to advice due to restrictions on charging models.
The regulator says that contingent charging is a "complex area" and the responses to the FCA’s consultation confirm its initial analysis that the evidence it has seen does "not show that contingent charging is the main driver of poor outcomes for customers." The FCA’s supervisory work to date has also identified a number of other causes of poor advice, and it will carry out further work on the quality of advice, it says.
The FCA’s work on improving the quality of pension transfer advice has been continuing since 2015 and following its supervisory work, a number of firms have stopping providing pension transfer advice. It is also continuing to speak directly to advisers about what good and bad practice looks like at a series of Live and Local events.
Christopher Woolard, FCA's executive director of strategy and competition said: “These new rules will mean advisers have greater certainty and confidence in what we expect when they offer pension transfer advice.
“We expect our interventions to improve the quality of advice which will help to reduce the number of complaints against advisory firms. We will measure consumer outcomes through our supervisory work.”
“Any changes to our rules on contingent charging could have implications for the supply of advice. Because of the significance of this issue to all stakeholders in the market, we will carry out further analysis and consult on new interventions if appropriate in the first half of next year.”