Financial Conduct Authority (FCA) intervention resulted in 130 advice firms ceasing to operate in defined benefit (DB) transfer advice in 2020, the regulator has reported.
In a report published on 18 January, the FCA also revealed that, out of 1,797 advice firms surveyed, 1,310 gave DBt ransfer advice between October 2018 and March 2020.
However, in those 18 months, the regulator found that the proportion of pension scheme members who are recommended to transfer following advice has fallen from an average of 69% in October 2018 to 57% in March 2020.
The watchdog also reported 49,456 clients were provided with a personal recommendation to transfer or convert their pension in the period from October 2018 to March 2020. In addition, the regulator said 38,035 of clients were advised not to transfer or convert their DB pension and 121 firms that gave DB transfer advice facilitated transfers for 2,936 insistent clients
At the time of publication, 1,521 advice firms still held DB transfer advice permissions. The FCA reminded readers that, from April 2021, all financial advice firms with DB transfer permissions must report this data on a six-monthly basis.
The regulator said: “Overall the FCA continues to believe that for the majority of people it is not in their interest to transfer out of a DB pension. Where an individual seeks advice to transfer it is important that advice given is suitable and appropriate for their needs and situation.
“Where we find that firms are not meeting our expectations we will take action to ensure firms put things right.”
LCP partner Steve Webb said: “It is a welcome trend that historically high rates of recommendations to transfer out of defined benefit pension schemes are now on the decrease. But the DB transfer market remains a source of real concern.
“The supply of advisers has fallen dramatically in recent years, and recent regulatory changes plus the cost of obtaining insurance is likely to reinforce this trend.
“Members are likely to find it increasingly difficult to source high quality impartial advice if left to their own devices. This data reinforces the case for pension schemes to appoint one or more high quality advice firms to help members make good choices about pension transfers.”