The FCA guide for the redress for unsuitable defined benefit pension transfers

The Financial Conduct Authority (FCA) published on the 27 October its final guidance for the calculation of the redress owed to consumers who are given unsuitable advice to transfer out of a Defined Benefit (DB) pension scheme. The new methodology will no doubt speed up the wave of expected complaints relating to final salary transfers expected in the coming years.

In simple terms, the new calculation basis increases significantly the potential compensation award for those who transfer their final salary pension 10 or more years before the normal scheme retirement age. At 15 years, for compensation purposes, the capitalised value of the Defined Benefit pension could be c17% higher and at 20 years c26% more than the previous model. The compensation would be based on the projected capitalised value of the Defined Benefit pension less the current value of the transferred pension.

In terms of what this means for consumers, the likelihood is that for those with more than 10 years to the scheme normal retirement age, the chances of an adviser recommending a pension transfer are even more diminished. Up to now transfers for those in their 40’s or younger, whilst uncommon, have been advised on grounds such as health, investment experience, wealth etc.

At Final Salary Transfer Wise (an initiative of Blackstone Moregate), we are happy to review all clients, regardless of age. We consider a range of factors when preparing and giving our advice.

If you have been advised to transfer, and you suspect you might have received bad advice, we are able to review your case for a fee. Where appropriate, we can also help you during the complaints process.

Matthew Jordan

Matthew is an specialist in pension transfer and ethical investments with detailed knowledge of financial matters on divorce. Matthew holds the Financial Planning Diploma, which is the benchmark qualification to provide financial advice, and is continuing with his studies in technical areas (such as pensions). He also holds the specialist pension transfer qualification AF3. In addition to pensions, he has a detailed knowledge on financial matters on divorce and is a specialist on ethical investments.

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