Guidance on providing support on financial matters to members

The Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have published a ‘Guide for employers and trustees on providing support with financial matters without needing to be subject to FCA regulation’ (the Guide).

Trustees and most employers do not have the required FCA authorisation to provide members with advice on financial matters. Generally, Trustees and employers can provide generic or factual information and signpost staff to publicly available resources for information and guidance about financial matters. Trustees and employers cannot help members make decisions on their pension in a way that would likely be considered as providing financial advice. The Guide sets out what employers and Trustees can do to help members with financial matters, without needing to be authorised by the FCA.

Background

Pension freedoms introduced back in April 2015 created greater flexibility for individuals to access pension savings under Defined Contribution (DC) pension arrangements. This has contributed to an increase in individuals transferring their pensions savings from the relative security of a DB arrangement (DB) to more flexible DC arrangements. The Guide has been published in conjunction with other FCA guidance on DB pension transfer advice.

It is important that members get the right advice when considering financial matters, such as whether to transfer their pension benefits, as it may not be in their best interest. The right checks and advice are also important given the increase in pension scammers using transfers to scam members out of their pensions savings.

FCA authorisation

Trustees and most employers do not have the required FCA authorisation to provide members with advice on financial matters and are therefore limited in what help they can give. The Guide sets out what employers and Trustees can do to help members with financial matters, without needing to be authorised by the FCA.

Arranging for employees to get regulated advice

Trustees and employers may want to arrange access to financial advice for scheme members. This could be through a named FCA authorised firm, or by appointing independent third party experts to recommend a firm and to undertake an ongoing review of the quality of the advice. Trustees and employers should take care not to give advice and arrange for transactions on financial products.

The Guide confirms that a one-off exercise of identifying a list of suitable advisers would not be considered to be a regulated activity requiring authorisation.

The Guide also confirms that arranging for scheme members to get independent advice on a broad range of pension products they can transfer to is likely to fall outside the regulated activity requiring authorisation. It is important to note that the advice should not be from a restricted adviser who can only offer advice on a limited selection of products and/or providers.

Safeguarded benefits

If a member wants to give up benefits in a DB scheme, for a pension that offers flexible benefits, such as a DC scheme, and the cash equivalent transfer value of the pension is over £30,000, the member must take independent advice before they can transfer any funds. Before agreeing to release the safeguarded benefit funds, the Trustees must check that a member has taken advice from a firm that is independent of the employer or Trustees/manager of a scheme and is authorised by the FCA to give this advice. Trustees can use the Financial Services Register to confirm the firms which are able to give this advice. Trustees should not ask for a copy of the advice the member has received or ask about the substance of the advice as this is confidential to the member. They should just confirm that the adviser’s confirmation meets the legislative requirements.