The industry has broadly praised the Financial Conduct Authority's (FCA) proposal to ban contingent charging on defined benefit (DB) transfer advice as a move towards improving retirement outcomes.
The FCA announced today (30 July) that it is consulting on the matter for the second time in less than a year, over concerns that too many advisers were delivering poor advice, much of it driven by conflicts of interest in the way they are remunerated.
Many pension experts said this will help to protect savers if the rule comes into force, but more may need to be done beyond the FCA's proposed expectations.
Association of British Insurers assistant director and head of long-term savings policy Rob Yuille said the trade body is "encouraged to see the FCA strengthening regulation of advice firms to tackle ongoing conflicts and improve standards".
This was echoed by Pensions and Lifetime Savings Association head of defined contribution, master trusts and lifetime saving Lizzy Holliday, who said the trade body has "consistently supported a ban on contingent charging", as it creates an incentive to give advice that is not in the best interest of the saver.
However, she noted that "more may need to be done beyond the carve-out for short advice which results in a recommendation not to transfer out to bride the advice gap, including the use of technology".
She also suggested expanding the Money and Pensions Service - which unified the Pensions Advisory Service, Money Advice Service, and Pension Wise under a single structure in March.
She said it should "include triage and the broadening of guidance definitions for trustees, schemes, and employers to help their members".
However, while Hymans Robertson partner and senior consulting actuary Ryan Markham also welcomed the proposal, he also pointed out that "advice processes and disclosure requirements will also need to change".
He added: "As a result of this, in the short term at least, we are likely to see a shrinking of the pool of advisers which operate in the DB to defined contribution space. The proposal is also likely to create a reluctance for members to take advice if they have to meet upfront costs directly regardless of the advice outcome.
"This feels a particular barrier for members who don't meet the limited FCA circumstances where contingent charging could still apply but who ultimately can't afford the upfront costs of advice.
"We'd hate to see a situation where these lower income individuals who potentially have the greatest need for advice fall through the cracks. The issue therefore needs full debate with real focus on how the availability, costs and quality of advice will be impacted if contingent charging is banned."
The industry also welcomed a second document published by the FCA today, in which it announced drawdown providers will have to offer non-advised consumers investment pathways from August 2020 in the final rules and guidance for its Retirement Outcomes Review.
Smart Pension director of policy and communications Darren Philp said this is a "timely and important step" from the FCA, and that the master trust welcomes the "consistent approach across all decumulation providers" to protect non-advised members from missing out on extra income.
However, while Pinsent Masons partner Tom Barton noted that this will help to steer people away from just "parking their money in cash" or taking tax-free cash, the pathways take a "short-term view of things".
He added: "Non-advised drawdown customers will get risk warnings and costs and charges disclosure but there will always be a question mark over whether people can use this sort of thing to any meaningful effect.
"The focus now should be on facilitating more helpful forms of ‘help' (advice or guidance) and a wider range of ‘set and forget' default options."
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