On Wednesday 21st June the FCA published new proposals on advice relating to pension transfers where consumers have safeguarded benefits, primarily for transfers from defined benefit to defined contribution pension schemes.
Paul McNamara, CEO of EValue commented: “EValue welcomes the FCA consultation on DB pension transfers which seeks to improve the advice given to employees considering alternative options for their benefits. These are complex decisions which we agree need the highest quality of personalised advice.
In our response we will be considering how best to analyse and explain the pros and cons of choices available which will need to be firmly based on current and future market conditions, the nature of any guarantees which might be forgone, personal priorities for cash flow flexibility and risk appetite.
We are concerned that simplistic point estimates of asset values will not adequately capture the range of outcomes which are involved when transferring a pension from one arrangement to another and believe advisors should be equipped to explain the chances of different outcomes and strategies to mitigate risks or bad outcomes. The assessment of transfer values against alternative guaranteed future income is only one input to the analyses required and a more complete picture can only be presented having considered fully all relevant personal circumstances and prioritised goals including flexibility required, future market scenarios, other sources of income and assets, tax implications, risk appetite and capacity for loss.
We welcome proposals to improve the transparency of pension schemes to support advisors, in particular to give clearer descriptions of current benefits and their future likely progression.”