New delay for contingent charging ban decision

James Phillips reports

The Financial Conduct Authority (FCA) has postponed its decision on whether to ban contingent charging on defined benefit (DB) transfers by up to six months.

The watchdog quietly updated the timeline of its pension transfer advice consultation, with its revised handbook text now due to be published in the second or third quarter of this year, rather than the first quarter, as originally planned.

The consultation also explored whether to introduce a form of “abridged advice” and a crackdown on high ongoing charges post-transfer. The FCA had voiced concerns that too many advisers were delivering poor advice, partly driven by conflicts of interests in the way they are remunerated.

However, in the latest consultation paper, published last summer, it revived the idea, stating contingent charging was “an obviously conflict of interest”, and proposed just a specific group of customers with “certain identifiable circumstances” should face the charges.
Aegon pensions director Steven Cameron welcomed the delay amid the Covid-19 crisis: “In these unprecedented times, people need advice more than ever and a contingent charge ban, leaving individuals no choice but to pay upfront for advice, would have made it more difficult for some individuals to access advice on DB transfers.

“The FCA had proposed a carveout from the ban for those in significant financial hardship, but in the current climate it would have been even harder to objectively assess whether an individual met that definition.”

But Lane Clark & Peacock said the decision was “disappointing”. Partner Clive Harrison said: “If the FCA believes that the consumer detriment from poor-quality advice runs into billions of pounds, it is very disappointing that measures designed to improve the advice market have been delayed.

“Given the particular concerns in the current Covid-19 environment about pension scheme members being vulnerable to scammers, and poor-quality advisers taking advantage of members’ fears, it is vital that consumer protection measures are maintained as far as possible, despite the present situation.”