Proposed ban on contingent charging to cost advisers £445m

Proposals set out today by the FCA around banning contingent charging for pension transfer advice, particularly for DB to DC transfers, is estimated to result in up to a £445m pa reduction in adviser revenue.

In the FCA’s consultation paper, the regulator said incorporating workplace pensions in advice processes is estimated to cost around £3.2m pa.

In addition, the ban on contingent charging: reduction in unsuitable advice is expected to cost £952m to £1.59bn pa, according to latest figures.

Today’s consultation paper (CP), details measures to change how advisers manage and deliver pension transfer advice, particularly for DB to DC transfers. Concerns have been raised that too many advisers are delivering poor advice, much of it driven by conflicts of interest in the way they are remunerated.

Groups of consumers with certain identifiable circumstances that mean a transfer is likely to be in their best interests will be exempt from the ban on contingent charging. Furthermore, the FCA said it is proposing that where contingent charging is permitted, advisers will have to charge the same amount, in monetary terms, for advice to transfer as they charge when the advice is contingent.

The introduction of a short form of ‘abridged’ advice that can result in a recommendation not to transfer based on a high-level assessment of a client’s circumstances has also been proposed. “This will fall outside the proposed ban on contingent charging and should help maintain initial access to advice,” the FCA said.

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