The U.K.'s financial services regulator is proposing to ban certain charges levied on pension transfer services, addressing a conflict of interest that incentivized some advisers to recommend plans that weren't in consumers' interests but paid them decades-long fees.
The watchdog is proposing changes on how financial advisers are paid for helping clients move between pension providers, the Financial Conduct Authority said Tuesday in a statement. The changes include improving how charges are disclosed and setting out how advisers should show why the product they're recommending is more suitable than the customer's workplace pension scheme.
The FCA found that 69% of consumers were advised to transfer and that most would have been better off not moving their accounts. The regulator said it had "serious concerns" about how advisers charge for advice, and that distrust in the quality of pension transfer advice was growing, according to the statement.
"The FCA's supervisory work has revealed continued problems in the pensions transfer advice market," Christopher Woolard, executive director of strategy and competition at the regulator, said in the statement.
The regulator's proposal came after long-running complaints about financial advisers being incentivized to recommend certain products over others. In some instances, investors were told to move retirement savings out of defined benefit plans where returns were fixed and into managed accounts where future gains were uncertain, but where advisers would receive fees that could run for up to 30 years after the transfer.
The changes will require advisers to charge the same amount regardless of whether clients move their pensions, and to recommend a workplace pension as a receiving scheme for a transfer where one is available, the FCA said. Advisers will also need to do additional training.
"By making changes to the way advisers are paid for transfer advice and the other changes to transfer advice we are proposing today, we want to ensure people receive suitable advice and drive down the number giving up valuable defined-benefit pensions when it is not in their interests to do so," Mr. Woolard said.
The FCA consultation will run until Oct. 30.