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Bad practice, poor advice and other failings have been found by the FCA after investigating financial advice given to people who were offered enhancements to incentivise them to leave their employers' defined benefit pension schemes.
The regulator's report identified a risk of customers losing out on retirement income due to "poor advice".
The review looked at nearly 300 cases from bulk pension transfer advice exercises between 2008 and 2012, selected from financial advisory firms active in this area.
In a third of these cases, the review found that the advice given to customers was not suitable although the failings were not equally spread across the financial advisory firms.
Clive Adamson, director of supervision at the FCA said: "Transferring from a defined benefit scheme to a defined contribution scheme is an important decision for consumers.
"It is disappointing that our review saw failings in the advice given, particularly when incentives have been provided to consumers to transfer.
"All firms active in this complex area of pension transfer activity should think very carefully about the quality of the advice process and assurance framework required to deliver fair customer outcomes."
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Drivers of "unfair customer outcomes" found in the review included:
· generic templates which were inadequately 'tailored' so the advice did not reflect specific member circumstances or give sufficient priority to the members' own requirements;
· advice where the outcome focused solely on critical yield analysis without full consideration of wider member circumstances;
· not establishing adequately the level of risk a member is willing and able to take;
· fund recommendations which did not match the assessed risk profile of the member;
· the use of default receiving schemes (in some cases with uncompetitive charging structures) and limited consideration of the suitability of a member's other existing pension arrangements; and
· limited consideration of the tax and in a small number of cases 'means tested benefit' implications of accepting the offer.
The FCA will outline its concerns directly with individual financial advisory firms in coming weeks.
It will ask them to contact members and offer redress where appropriate.
The FCA said it would work with firms to ensure that affected consumers receive appropriate redress and for most consumers there is no need to act straight away.
ETVs may be offered by employers to incentivise members to transfer out of their DB pension schemes, such as a final salary scheme, into a defined contribution scheme, typically a personal pension.
