Improvements in the market over the coming 12 months could lead to a dangerous spike in defined benefit mis-selling activities in the UK, warns a regulatory expert. 2017 brought about an unprecedented increase in pension transfer mis-selling, attributed largely to the British Steel Pension Scheme scandal.
Now, the FCA (financial conduct authority) is placing heavier scrutiny than ever before on the defined benefit sector, after reaching the conclusion that customers are still being provided advice that is “not of an acceptable standard”.
Speaking on behalf of Duff & Phelps, managing director of compliance and regulatory consulting Nick Bayley warned that the coming year could bring further issues with defined benefit transfers and spoke of stricter regulatory refocus.
“With interest rates remaining low, the huge defined benefit transfer market will remain a major regulatory focus in 2020 and the FCA will likely confirm its proposed ban on contingent charging, which it sees as an unmanageable conflict of interest,” he said.
“The FCA will also likely introduce abridged advice for defined benefit transfers, although the level of take-up by the industry remains questionable,”
“If the markets turn in 2020 and those who were badly advised to transfer out of their gilt-edged defined benefit schemes realise they may have made a big mistake, this will likely become the next mis-selling scandal.”
The FCA recently reported that more than 1,600 firms had been contacted during 2019 alone, due to risks having been identified in their approach to the provision of defined benefit transfer advice.