The U.K.'s Financial Conduct Authority will write to financial advisers that are active in the defined benefit pension transfer market about actions that these firms should take to improve their standard of advice.
Following research published Wednesday, the U.K. financial services watchdog said it has seen too many firms recommending that large numbers of plan participants transfer out of their pension funds, despite the FCA's stance that such transfers could be unsuitable for them.
The FCA surveyed 3,015 firms and found that between April 2015 and September 2018, 2,426 firms recommended to half of a total of 234,951 participants that they transfer assets collectively worth £82.8 billion out of their defined benefit plans.
In an effort to strengthen the rules for transfers and improve the standard of such transfers, the FCA said it has identified harmful practices around advice and will engage with these advisers.
"We have said repeatedly that, when advising on DB transfers, advisers should start from the position that a transfer is not suitable," said Megan Butler, executive director of supervision-investment, wholesale and specialists at the FCA, in a news release. "It is deeply concerning and disappointing to see that transfers are still being recommended at the levels we have seen."
Ms. Butler added: "Deciding whether to transfer out of a DB (fund) is one of the most complex financial decisions a consumer may have to make, and it is vital customers get high-quality advice. Our ambition is for pension transfer advice to reach the same standard as that of the rest of the financial advice market."