Abridged Defined Benefit Pension Transfer Advice

Published / Last Updated on 20/08/2020

From October 2020, contingent charging for defined benefit pension transfers is banned.  This means from that a financial adviser can no longer offer you defined benefit transfer advice without charging a fee unless a transfer goes ahead.  The FCA suggests, and we agree, that if an adviser only gets paid if a transfer goes ahead then this can lead to poor advice outcomes e.g. transferring when perhaps it was not in your best interests to transfer.

That said, the FCA acknowledges that people still need advice at such a critical time and to try and keep the costs low for consumers they have devised an advice regime where you can seek ‘abridged’ i.e. shortened or limited advice without the need for a full pension transfer analysis being done.

What is Abridged Advice?

The adviser can complete a full fact find questionnaire with you, meaning you provide information and discuss your personal finances, income, expenses, tax position, health, wealth, family history, hereditary health conditions and longevity.  In addition, the adviser will discuss your overriding reasons as to why you wish to consider a pension transfer, your investment experience, attitude towards risk etc. The adviser may also speak to you existing pension scheme to gather more information, with your permission of course.

The adviser cannot and will not complete a full Appropriate Pension Transfer Analysis (APTA), which is an actuarial analysis of the scheme and also will not complete Transfer Value Comparator (TVC) – a comparison of how much it would cost to buy you exactly the same pension scheme benefits on the open market.

Abridged advice can only lead to two outcomes:

  1. You are not suitable for full pension transfer advice and should not proceed to the next stage.  The financial adviser will still be required to issue a full suitability advice report for this and you to pay for this lower cost ‘stage 1’ advice.
  2. From the initial abridged advice, it is unclear as to whether it would be in your interests to consider full pension transfer advice or not and you should consider proceeding to a full analysis and advice.  Either way, by agreeing to move to full advice, the adviser’s fee will be payable in full whether the advice where then to transfer or not.  Either way, the full fee must be payable which removes totally any potential bias because the adviser will be paid in full for advice whether you transfer or not.

One final point you should understand:  Abridged Advice does not count as full advice i.e. the adviser cannot sign any required advice certificate from the pension scheme confirming they have given advice as this is not full advice.

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