FCA: Supporting consumers with pension transfers

The FCA has issued a note entitled: “Supporting consumers with pension transfers”. This concentrates on the potential for individuals seeking Defined Benefit (DB)  transfer advice who, because of their personal circumstances, may need to be treated as vulnerable clients. Some of the indicators of potential vulnerability include them being:

• worried about the financial situation of their DB scheme’s sponsoring employer
• concerned about the solvency of their DB pension scheme
• worried their DB scheme is at risk of going to the Pension Protection Fund, or
• in serious financial difficulty due to the cost of living

Any of these circumstances may cause a consumer to seek financial advice. For some, the pension scheme will be their only retirement provision aside from their state pension.  

Consumers in these situations may also be susceptible to scams or fraud. The following are warning signs that consumers may be more vulnerable to scams or fraud activity: 

• they may appear overconfident in their decision making despite low knowledge of pensions or investments
• they may be experiencing distraction from personal life events
• they may be experiencing financial dissatisfaction
• they may be in cognitive decline or socially isolated or lonely, or 
• they may appear in a hurry or agitated about arranging the pension transfer

The FCA then go on to explain how they expect firms to deal with clients like this given the new Consumer Duty requirements. They also give four examples of processes that would be likely to result in a greater likelihood of good consumer outcomes:

• Fact-find checks for vulnerable characteristics
• Firm makes adjustments to assist vulnerable clients
• Firm carries out horizon scanning and
• Firm identifies need for debt management advice

The Private Office is accredited with the Pension Transfer Gold Standard which a voluntary code of good practice for safeguarded and defined benefit pension transfer advice, based around a set of principles. Find out more about the Pension Transfer Gold Standard here.

The information in the article is correct as at 21/09/2023.