This short note specifically addresses the importance of a suitable triage, as part of a compliant ‘DB transfer advice’ APTA framework.
Two key objectives in PS18/20
1. Giving advisers a framework to better enable them to give suitable advice so that consumers can make informed decisions about whether to give up safeguarded pension benefits.
2. By clarifying our expectations of advisers, both advice firms and PI insurers should better understand how firms can deliver suitable advice. We expect this to improve the way the market works for consumers
These two objectives really put the context of PS18/20 into place: the FCA want to help us (advisers) deliver good advice, and by delivering good advice within a framework which is understood, clients will get good outcomes and PI insurers will continue to provide cover for firms.
In other words, the FCA are here to help us deliver good DB transfer advice:
“Advisers should also be more certain and confident about our expectations when they provide pension transfer advice….“
This is the guidance set out in PS18/20.
This is the APTA framework.
This is using the APTA framework competently alongside a suitable triage.
Why is this important to you?
In the words from the FCA in PS18/20:
“Over 6 million people are eligible to transfer deferred benefits out of DB schemes…we estimated that 100,000 members are transferring out of their DB scheme each year. This means around £20-30bn per annum is moving out of DB schemes each year.“
In other words, £20-30BN is now funds under management by IFAs.
That’s a lot of business and it’s very tempting.
What should you know?
That there is a downside: “FCA published findings which showed that only 47% of advice we had reviewed on DB to DC transfers could be shown to be suitable based on the information in the file“
And there is a SEVERE catastrophic downside for some firms:
“Following our intervention, at the date of this PS, 18 firms had voluntarily varied their permissions so that they can no longer provide pension transfer advice…“
If you don’t get the APTA framework right and working competently alongside a suitable triage you are leaving yourself open.
The FCA will know you are successful if “…the interventions set out in this PS and in PS18/6 are successful, consumers should be more likely to receive suitable advice about whether or not to transfer based on their personal circumstances. This will help them to make informed decisions and give them confidence in the advice that is being provided…“
That outcome will be measured by:
FCA assessments of more DB pension transfer advice being suitable
See firms improve their record keeping so that more of them can demonstrate suitability
Advisers should also be more certain and confident about our expectations when they provide pension transfer advice
Prepare for advice
The new Appropriate Pension Transfer Analysis (APTA) that includes a prescribed Transfer Value Comparator (TVC), took effect from the 1st October 2018.
That also includes definitive guidance on the use of Triage, which is a KEY part of your advice preparation.
The FCA expect that you will give “…the customer sufficient information about safeguarded and flexible benefits to enable them to decide whether to take advice on the transfer or conversion of their pension benefits.’”
This fits very neatly with a key FCA outcome: “..that consumers can make informed decisions about whether to give up safeguarded pension benefits.“
If you want to help the FCA deliver one of two key outcomes in the DB transfer advice market, then make sure that you have a non-advised, balanced, educational triage designed to enable your clients to make an informed decision about choosing regulated pension transfer advice, before you start advising them.
Triage is key in preparing for advice. Check out this video from our Triage course:
Have a great week.
Next week we’ll tell you more about the APTA Framework.
The Expert Pensions Consulting Team