The FCA said in its annual report last week that 75% of firms surveyed had recommended DB transfers but the PFS says its findings suggest the data was “in stark contrast” to its own data.
The PFS said detailed figures given to it by an advisory firm significant in the DB transfer arena suggested that on average only 20% of clients were advised to transfer, not the 75% figure reported by the FCA.
The 75% figure was widely reported in the media with suggestion that because 3 in 4 clients were being urged to transfer - according to FCAC data - there was a need for a crackdown.
The PFS said it believes the FCA data focussed on the most active firms in the market and therefore was “not representative of the whole market.”
Following release of the data the FCA announced it would step up supervision of defined benefit transfer advice.
The PFS said the FCA surveyed 3,015 firms and found that between April 2015 and September 2018, of the 2,426 firms providing DB transfer advice, 1,454 firms had recommended 75 per cent or more of their clients to transfer out of a DB scheme.
Keith Richards, chief executive of the Personal Finance Society, said data obtained from a PFS member firm was in contrast to the FCA’s recent findings.
Mr Richards said the data from the advice business, which is appointed by trustees and employers to deliver retirement advice but wished to remain anonymous, showed there were clear limitations in the FCA’s data being used to sum up what is going on in the wider market due to a lack of context.
FCA area of concern FCA Stats Advice firm’s Figures: Advice firm as % of total
Members receiving advice 234,951 4,959 2.1%
Advised to transfer 162,047 (69%) 1002 (20%) 0.62%
Recommended retain 72,904 (31%) 3957 (80%) 5.4%
Insistent clients* 9,534 (13%) 131 (3%) 1.38%
Average transfer value £352,303 £228,567
Transfer + ongoing advice 120,735 (70%) 361 (36%) 0.3%
Source: PFS
He said: “We welcome the FCA’s acknowledgement that their figures on the suitability of pension transfer advice is not based on an actual review of suitability and is equally not representative of professional advice more broadly. Specific to DB transfers however, the data shared with me by an advice business, which was one of the first to sign up to the Pension Transfer Gold Standard, paints a far less alarming picture.
“There is no context around age with the FCA’s data. Savers make different choices the closer they are to retirement, simply because retirement is now real to these individuals rather than some distant, far-off event.
“We are encouraged that the FCA has acknowledged the concerns raised of potential disproportionate reporting and has agreed to share learning outcomes from their supervisory work that we will build into our programme of CPD and good practice. Professional advice was put in place to protect consumer interests, but not to stop people from exercising their right to transfer, even if against professional advice.”
Mr Richards said the PFS’s new Pension Transfer Gold Standard was designed to help improve “consumer guidance and empowerment.” Hundreds of Personal Finance Society members have already signed up to the Pensions Transfer Gold Standard.