FCA orders 60 advice firms to carry out DB transfer past business reviews

The Financial Conduct Authority (FCA) has identified 60 advice firms that should carry out past business reviews over potential pension transfer mis-selling.

According to a submission made by the regulator to a Work and Pensions Committee inquiry, the financial watchdog said it has "intervened extensively" to improve the rate of suitable defined benefit (DB) transfer advice.

This interaction, it said, resulted in direct contact with 104 advice firms. Of those advice firms, there were 39 variations of permissions, 21 asset retentions and almost 60 the FCA said "need to carry out past business reviews".

One case resulted in High Court proceedings, the FCA added.

It said that during its review, consumers often describe pensions as a minefield, with even those who felt confident in other aspects of their finances struggling to understand how pensions work. The submission stated: "One area where consumers are required by law to take advice is when transferring out of a DB scheme. We have seen high levels of unsuitable advice at this point in the past - when we reviewed files from the period 2015 to 2019, we found 17% of recommendations to transfer were unsuitable, and only 55% clearly suitable."

The FCA has recently taken steps to clamp down on pension transfer advice. Earlier this month (15 June), the FCA said advice firms wanting DB transfer permissions would be "scrutinised".

In an update, the regulator said that, due to the high risk of consumer harm associated with unsuitable advice to transfer, it will thoroughly check applications from new entrants applying for transfer permissions. 

"We test the robustness of firms' systems and controls, and we ensure the competence of individuals seeking approval."

The FCA said it would apply this approach at "all gateway entry points". This included new firm or individual authorisations, variations of permission, the appointment of appointed representatives and changes in controllers.

'Pro-actively working with steelworkers'

Elsewhere in the report, the FCA said is it working "pro-actively" to encourage ex-members of the British Steel Pension Scheme (BSPS) to complain.

"As a group, our data shows that they received particularly poor advice to transfer with only 21% of advice we reviewed being clearly suitable."

It said a survey of former members showed a large proportion had not considered complaining. "So, we are now refining our communications strategy to ensure we are reaching these steelworkers in the most impactful way to make them aware that they could be entitled to compensation."

The FCA has been involved in helping steelworkers get compensation after many were advised to transfer out some four years ago.

However, other advisers, as well as MPs, have expressed their disappointment at the FCA's handling of the case. 

Over the last couple of months, Welsh MPs Nick Smith and Stephen Kinnock sent two letters to FCA chief executive Nikhil Rathi. 

The first asked for support on the BSPS saga and the second expressed the pair's disappointment that Rathi did not respond to the first. PA revealed that the FCA took one month to respond to a letter sent my MPs asking for support on the British Steel saga.