The Financial Conduct Authority (FCA) will not cease supervisory work on defined benefit (DB) pension transfers until advisers can demonstrate a suitability rate which mirrors the 90% level that has been found for advice in general.
Speaking at a press briefing after the regulator's annual public meeting today, executive director of supervision Megan Butler said there was no end in sight for the FCA's scrutiny of firms offering advice on pension transfers.
She said: 'We have been working in for a couple of years with three rounds of assessment and testing, and we are now moving into a fourth round. Those three so far have been on a sampled basis, but this fourth round is to gather data from all of the 3000 advisers that work across this area, so that we can make sure that we are extrapolating properly our conclusions across this sector, so that we can target our supervisory work.
Butler said the FCA was 'gaining more and more intelligence' around firms and activities that are 'causing harm'. She said much of that information is coming from other advisers and members of the public. She said the FCA was making increasing use of such tip-offs, as the issue of pension transfers gets more media coverage. 'People are more willing to come to us so that we can take action against individual firms, which we continue to do,' she said.
'It has been a key part of our supervisory work, it is going to continue to be until we see standards improve from the level we have previously published, where only 34% giving suitable advice in this area, and we will carry on this work until that statistic is much closer to what we have seen more broadly in the advice sector, which is around 90% broadly suitable.'
The FCA's Assessing Suitability Review identified 90% of pensions accumulation advice and 91% of retirement income advice as suitable.
In late 2015 the regulator reviewed 88 DB transfer cases where the recommendation was to transfer, and found that 47% constituted suitable advice, while 17% were unsuitable and in 36% of cases it was unclear whether the recommendation was suitable.
The FCA also considered the suitability of the recommended product where transferred funds ended up, identifying only 35% of products as suitable for the particular client, while 24% were unsuitable and 40% unclear.