DB Pension Transfers - Lessons 

ValidPath Members will be aware that we followed the whole British Steel saga in 2017 with some interest, blogging about it here and here.  We were also swift to respond to the publication of PS18/6, which marks out the FCA's new approach in regulating advice in this area.  Clearly, anyone who thinks that they are equipped to advise in this specialist area would be clinically insane not to have immediately got to grips with PS18/6, in order to bring their own advisory processes into line with what is now required.  There are two new developments (APTA and TVC) which come into force on 01/10/2018, but otherwise the FCA's expectation is that Advisers will be basing their activities upon the new rules right now.

ValidPath Members have no excuse on this matter, as we published our analysis of PS18/6 on 27/03/18, a few days after the FCA published it.

Clearly, DB Pension Transfer Analysis, or rather the activities of the 'Pension Transfer Specialist' (PTS) is a form of arcane knowledge, reserved only for the Chosen Few.  Within ValidPath, we have a shortlist of experts, qualified to deliver a PTS service, and with permissions to do so.  It is conceivable, therefore, that other Advisers (those who have no interest in this area) might consider that outcomes of the recent FCA thematic reviews are less than relevant to their own circumstances.  We would beg to differ, but in the meantime, here's a quick summary of some of the outcomes from the FCA's recent focus since 2015:

  • It assessed 22 firms showing increased activity in this area
  • File reviews were conducted for 13 of those firms, with 12 site visits
  • 4 firms chose to stop advising as a result
  • 47% of all transfer recommendations were unsuitable
  • 35% of all receiving products/funds were unsuitable
Subsequently, the FCA took specific action in relation to the British Steel (Tata) Pension Scheme.  The outcomes from this are similar:
  • 14 advising firms visited
  • 172 file reviews
  • 34% of recommended cases were unsuitable, with 10% of all cases failing to demonstrate any measure of suitability
  • 13 firms ceased advising (in this area) as a result
All of this is public domain stuff, and if you are not a PTS then perhaps you are wondering why I am going over it again?  The answer is that the observed causes of 'unsuitability' could, equally well, apply to many (or most?) other areas of advice.  After all, if the work of the PTS carries with it an elevated compliance 'risk', then you would expect the basic things to be covered off even better than would be the case for less risky stuff, wouldn't you?  And clearly, with an almost 50% failure rate, that is not happening.  So, what were the sources of failure, and how might they have wider application?  Here's a quick summary: At a granular, detailed level, there's much more here, but we think these are the main categories of weakness which, as far as I can see, might afflict and undermine any area of advice.  And, for what it's worth, having had the benefit of meeting the team leader of the specialist FCA unit focusing on this issue, I think they've done an excellent, and remarkably competent job.
Kevin Moss, 27/04/2018