No transfer, no fee pension deals are to go following a probe by City watchdogs worried about charges made by financial advisers.
The Financial Conduct Authority is proposing a ban on contingent charging, which is when an adviser is only paid if a pension transfer goes ahead.
The ban will apply to all transfers unless the adviser can show that the transfer was in the best interests of the customer.
These circumstances are expected to be limited as the FCA takes the stand that any transfer from a direct benefit pension is unlikely to benefit consumers.
The FCA is also looking at ongoing fees charged to pension savers when they switch from a workplace to personal pension.
Pension advice problems
In some cases, says the watchdog, these fees can continue for 20 or 30 years and can impact the size of a fund on retirement.
The proposal is to make advisers explain why transferring a pension out of a workplace scheme is advantageous to the saver.
Christopher Woolard, executive director of strategy and competition at the FCA said: “The FCA’s supervisory work has revealed continued problems in the pensions transfer advice market.
“By making changes to the way advisers are paid for transfer advice and the other changes to transfer advice we are proposing today, we want to ensure people receive suitable advice and drive down the number giving up valuable defined benefit pensions when it is not in their interests to do so.”
As well as addressing contingent charging, the FCA is consulting on other measures to change how advisers manage and deliver pension transfer advice.
Charges too complicated to compare
These include introducing abridged advice so that firms can deliver low cost advice to customers who should not transfer, improving how charges are disclosed and setting out how advisers should demonstrate customers’ understanding of the advice.
The consultation runs until October 30.
The FCA has published research that shows retirement savers do not fully understand financial advice or pension charges because they are too complicated to compare .
“Together these changes should help to address the overarching harm identified in our joint pension strategy with The Pensions Regulator – that people don’t have adequate income, or the income they expected, in retirement,” says the FCA.