Which.co.uk have stated that the FCA are taking action following an investigation into pension transfers, recognising that ‘too many people have been given poor pension transfer advice’.
The Financial Conduct Authority (FCA) is banning the use of ‘no transfer, no fee’ charging models for pension transfer advice from October.
It comes after the regulator has found cases of people being advised to transfer out of valuable defined benefit (DB) or ‘final salary’ pension schemes into a defined contribution (DC) scheme, despite it not being in their best interests.
The FCA has recognised that advisers could be offering poor advice in order to get paid and has announced it will ban the controversial advice model from 1 October.
What the FCA ban could mean for you
Many advisers have been charging 4 to 5% of the transfer value, which equates to £17,615 for the average transfer of £352,303, according to the regulator’s most recent data.
It has estimated that the ban could save consumers £1.4bn a year in a best-case scenario. However, this means from 1 October, you’ll be required to pay for pensions advice upfront, although there are some exceptions.
The ban applies to all apart from specific groups, such as those financial hardship (such as losing your home), people with serious health conditions or those who may have a shortened life expectancy.