Consumers who want to transfer their defined benefit (DB) pension schemes to defined contribution (DC) will be required to take professional advice before doing so, under proposals from the Financial Conduct Authority (FCA).
Consumers who want to transfer their defined benefit (DB) pension schemes to defined contribution (DC) will be required to take professional advice before doing so, under proposals from the Financial Conduct Authority (FCA).
According to a consultation paper published by the FCA, savers will be required to seek advice, and trustees and managers will be required to check that advice has been given before allowing the transfer.
The FCA also proposed that advisers should be qualified pension transfer specialists.
Christopher Woolard, director of strategy and competition at the FCA, said the FCA wanted to ensure those considering switching were "fully aware of the potential benefits they are giving up". He added: "In many cases, transferring from DB to DC may not be in the member's best interests and ensuring independent advice is taken is an important protection."
Tom McPhail, head of pensions research at Hargreaves Lansdown, said the consultation was a "reflection of the very tight timescale of reform imposed by the government".
He said: "It also makes sense to bring transfers to occupational DC schemes into the advice regime. If it walks like a duck and quacks like a duck, it probably is one; DC schemes carry the same effective risk as transfers to money purchase personal pensions and so should be treated the same."
Jon Hatchett, partner and head of corporate DB at Hymans Robertson, expected around a third of DB members to transfer. He said most consumers were not willing to pay for advice but "delivering advice to the numbers involved will prove costly".
A consultation is to run until 15 April 2015, via the online response form.
