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11 Oct 2017

Savers who transfer pensions often get unsuitable advice, FCA finds

Pension savers who seek financial advice on transferring out of a “final salary” scheme are often given unsuitable recommendations, according to an investigation by the Financial Conduct Authority (FCA).

With growing numbers of people abandoning defined benefit (DB) schemes, the regulator has been assessing the advice consumers receive about DB pension transfers and whether they are at risk of harm.

Consumers are required by law to obtain financial advice when transferring final salary benefits worth £30,000 or more.

Since October 2015 the FCA has reviewed a total of 88 DB transfers where an adviser recommended the saver transfer out of a pension. It found that this was the right thing to do in only 47% of the cases. In the remaining cases, the regulator said a transfer was either unsuitable or it was unclear whether it was the right thing to do.

Some firms made transfer recommendations without considering a receiving scheme or investments, or knowing the introducing adviser´s intentions for investment. This opened up the risk of consumers´ pension savings ending up in inappropriate or scam investments.

Examining the recommended products, the regulator found that only a third (35%) were suitable.

“The proportion of suitable cases was much lower than we found in the wider advisory market for pensions advice, e.g. our Assessing Suitability Review found that 90% of pensions accumulation advice, and 91% of retirement income advice, was suitable,” the FCA said.

Firms must make sure that their personal recommendations are suitable for clients, but in many cases they were:


  • Failing to obtain enough information about clients´ needs and personal circumstances;
  • Failing to consider the needs of the client alongside the client´s objectives when making a recommendation; and
  • Not making an adequate assessment of the risk a client is willing and able to take in relation to their pension benefits.


Meanwhile, some advisers failed to make appropriate comparisons between the DB scheme and the intended receiving scheme. As a result, their advice was based on incorrect or inaccurate comparisons.

The FCA recently consulted on changes to its rules and guidance on pension transfer advice.

It said it will continue to monitor the market and, where appropriate, to assess firms who provide advice on DB transfers.

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