FSA guidance on giving pensions transfer advice to members of defined benefit occupational pension schemes as part of an enhanced transfer value (ETV) exercise is out of date, consultancy Aon Hewitt says.
In transfer exercises, the schemes' sponsoring employers offer members the chance to transfer their benefits out to another scheme and will usually pay an enhancement or incentive to encourage them to do so.
Alan Howard, part of the firm's liability management team, said new guidance needed to cover both ETVs and all types of incentive to transfer exercises, including pension increase changes, total PIE and flexible drawdown.
These changes would help tighten up the advice process and reflect changing market conditions and practices, he said.
"Financial advice is clearly important and it helps members to understand the terms of ETV or incentive to transfer offers," he said in an interview with IFAonline's sister site, Professional Pensions.
"But that advice needs to follow FSA guidance and that guidance is now out of date."
Howard added that, as an additional protective measure, it should be made a legal requirement to adhere to the guidance.
In July last year, the FSA and The Pensions Regulator issued a joint statement saying they had concerns about the quality of advice being given to members and whether it reflects the starting assumption that a transfer will not be suitable.
They reminded firms of their "obligations under the client's best interests and pension transfer rules".
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