FCA, Pensions Regulator and Pensions Ombudsman guidance on providing support with financial matters without needing FCA authorisation

In our September update we reported that draft FCA guidance on advising on pension transfers had caused concern by suggesting that if trustees provided illustrative benefit figures to members, this could amount to regulated advice requiring FCA authorisation.  This was on the grounds that communications allowing members to compare the outcomes they might get by either keeping the defined benefit or converting it into money purchase benefits could steer the member towards a specific course of action. 

On 30 March the FCA published its finalised DB transfer guidance for advisers.  The FCA and the Pensions Regulator published a separate "Guide for employers and trustees on providing support with financial matters without needing to be subject to FCA regulation".  The guidance recognises that it is possible for trustees to provide unsolicited transfer values without that amounting to regulated advice that requires FCA authorisation.  However, the guidance goes into considerable detail regarding how information should be presented.  It includes detail on how annuity quotes should be presented and also says trustees need to take care that information provided is strictly factual.  It says that trustees should not provide "illustrative" figures based on assumptions that may not be borne out in practice.

In a separate development the Pensions Ombudsman has published a document "Panels and Independent Financial Advisers" setting out his approach where schemes provide their members with a list of independent financial advisers (IFAs).  The Ombudsman notes the FCA's position, which is that schemes should carry out and be able to demonstrate appropriate due diligence and should ensure ongoing monitoring of any IFAs included on a list.

Our thoughts

Providing members with help in their decision-making process can be a legal minefield.  The FCA takes a broad view of what constitutes investment advice requiring FCA authorisation, so trustees need to take care to avoid crossing the line into providing unauthorised investment advice.  Something as apparently innocuous as signposting members to a particular product provider risks crossing the line into advice.  Where trustees offer members access to products modelling different retirement options, they should make sure that they are not at risk of being held liable if members who use the product go on to make poor decisions.

In addition FCA and Pensions Ombudsman have made clear that if trustees are providing members with contact details for specific IFAs, they expect trustees to carry out some degree of due diligence checks on the IFAs.  On this issue, we would recommend that trustees do not provide lists of IFAs at all, but simply refer members to unbiased.co.uk.