The Financial Conduct Authority (FCA) has issued an update on defined benefit (DB) pension scheme transfers. DB schemes are occupational or “workplace” pensions, where the benefit is determined by a number of factors, including your salary and years of employment.
The FCA reports that there has been significant growth in the number of people transferring their DB pension plans into personal pensions. They report that a number of “specialist firms” are now offering advice on DB scheme transfers, having been referred clients by other financial advisory firms.
The FCA has warned consumers to be cautious if considering transferring out of a DB scheme. They have identified a number of risks associated with specialist firms providing advice on such transfers, including:
- Lack of communication between introducers and specialist firms, leading to ill-informed advice
- Lack of consideration given to the underlying investments
- Failure to assess the suitability of the transfer for the individual client
The FCA found a high number of cases where consumers were given unsuitable transfers and/or investment advice. Inappropriate advice exposes clients to potential scam investments, and they risk incurring a significant financial loss.
The FCA has started taking action against firms to address the issue. David Williams Independent Financial Advisors has been banned from carrying out DB pension transfers. Similarly, Strategic Wealth UK has been banned from carrying out pension transfers pending review.
If you have been advised to transfer out of a DB scheme as a result of negligent advice, you may be entitled to compensation.
Visit our financial mis-selling page for more information and to get in touch for a free, no-obligation consultation.