We share the results and lessons learned from our ban on contingent charging and other remedies in the defined benefit (DB) transfer advice market in 2020.
Read Evaluation Paper 25/1 (PDF)[1]
Read the Technical Annex (PDF)[2]
Our investigation in CP19/25[3] identified that the market for DB pension transfer advice was not delivering good outcomes for consumers.
Many advisers were providing poor advice, much of it driven by conflicts of interest in the way they were remunerated.
The contingent charging structure, where advisers were only paid if clients transferred out of their DB pension schemes, incentivised unsuitable transfers to defined contribution (DC) schemes. This, combined with advisers' behavioural biases, led to recommendations that often didn't serve consumers’ best interests.
To address these failures, in PS20/6[4], we introduced a ban on contingent charging along with other remedies. We aimed to reduce harm to consumers from unsuitable advice and poor value.
We assess the interventions effect on market structure, pricing, and uptake of advice. We do not comprehensively evaluate the ban's impact on the suitability of advice, which is difficult and costly to measure. However, there is still merit in analysing the available data to explore what has occurred in the market. This paper and technical annex present our methodology, results and lessons learned from this evaluation.
Next steps
We welcome your views on this Evaluation Paper.
Please send your comments to [email protected] or Economics Department, Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN.