MPs move to protect pension scheme members

The Work and Pensions select committee has reiterated that a ban on contingent charging would be the best way to protect customers after it completed its inquiry into the practice. The committee had launched an inquiry into charging structures for financial advice on defined benefit transfers earlier this year. In a letter to the Financial Conduct Authority, Labour MP Frank Field wrote the committee had found no evidence that contingent charging does not result in some advisers being incentivised to give bad advice.

There were also no suitable checks and balances in place to prevent this, he added. Contingent charging means a client only pays for the advice if they go ahead with the recommended course of action. In the case of pension transfers the adviser won’t get paid unless the pension is transferred, which is usually irreversible and likely to mean the client has given up valuable benefits which may not be in their best interest. The FCA had already consulted the industry in 2018 on how these structures for pension transfer advice may cause consumer harm and had decided against a ban in October despite finding widespread problems in the suitability of pension transfers.

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