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What the new FCA rules mean for pension advisers

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We take a look at the main impacts the new FCA rules will have in 2019 and beyond.

Back in October 2018, the Financial Conduct Authority (FCA) announced tough new measures to further limit pension mis-selling in the UK. These new rules were designed to improve the quality of pension advice. They also reduce the risk of investors losing out on their savings.

What are the new FCA rules?

The new FCA rules came into effect on 1st January 2019 and have paved the way for some major changes to how pension advice is given. The ultimate aim of these changes is to improve the overall quality of pension transfer advice.

The FCA rules now place greater emphasis on ensuring advisers understand their clients’ level of knowledge of the risks involved in any investment. Advisers will now be more accountable for the advice given. In addition, from October 2020 all pension transfer specialists will be required to hold a specific qualification for giving advice on investments.

Additional changes include tighter controls over the charging structures associated with advising on pension transfers. This means customers should now have a greater understanding of their charging structures. They will also have more opportunities to make a future complaint about the services provided by a pensions advisor, should their investments go wrong.

This is something APJ has campaigned to see for a number of years and we are pleased to see the FCA finally taking these positive steps. Any changes which see greater accountability for pension advisers should be welcomed.

How will these changes impact the industry?

In theory, these changes should make mis-selling of pensions far rarer. In reality, this is unlikely to be the case. The new rules set out by the FCA are, by their very nature, geared towards pension transfer specialists.

The efforts to ensure the client knows the risks involved in transferring their pension is commendable. However, we believe it does not go far enough. We want to see the FCA go even further in making sure due diligence has taken place. They should ensure investors are being advised that investments are right for them before any transaction takes place.

The changes to regulations around charging structures are only tentative. We want to see a greater power given to the customer so they have the means to protect their investment and recoup any losses in the case of mis-selling or mismanagement.

What do we expect for the future?

Many of our clients come to us after receiving bad advice to invest. In many cases, they were not aware of the risks involved in transferring their pensions. It is one of the fundamental areas where mis-selling takes place. Without radical changes to this area of legislation, we unfortunately expect to continue to see mis-selling happening in the UK.

2019 is going to a big year for mis-selling claims. The FCA’s new rules have been in the works for some time. Any pension advisers who have not taken the time to get their house in order could be in for some serious court cases in the very near future.

Do the new FCA rules affect you? Have you been mis-sold or badly advised in your investments? If so our team of financial mis-selling experts may be able to recover compensation for any loss suffered.