20 Jun 2019
FCA warns consumers on badly advised pensions
The Financial Conduct Authority (FCA) has raised concerns over thousands of consumers being wrongly advised to cash in their defined benefit (DB) pension, which could put them at higher risk of financial insecurity in old age.
Advice being given was for people to opt to take a lump sum out and transfer it to a poorer-value stock market-linked scheme defined benefit pension scheme, at the expense of a guaranteed income for life.
Megan Butler, an FCA executive director, said:
“We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable. It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen.
“Deciding whether to transfer out of a DB scheme is one of the most complex financial decision a consumer may have to make and it is vital customers get high quality advice”.
The FCA surveyed 3,015 firms, were they found that between April 2015 and September 2018 2,426 firms had provided advice on transferring a DB pension. From these companies 234,951 scheme members had received advice on transferring, of which 162,047 did.
DB pensions worth a total £82.8 billion, with an average value of £352,303, have been advised to transfer out.