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Pension trustees to check adviser credentials on DB transfer advice

Advisers now have to provide pension trustees with details of any transfer advice they give to members of defined benefit pension schemes, according to final guidance by the UK’s pension regulator.

Pension trustees to check adviser credentials on DB transfer advice


In last week’s document on DB transfers, the Pensions Regulator also issued further clarification around the Financial Conduct Authority’s requirement for all transfers out of defined benefit schemes to be provided by an FCA-authorised pension adviser. 

The guidance, which follows a consultation closed last month in anticipation of yesterday’s pension reforms, confirms that trustees are required to check “appropriate” independent advice has been received by the pension holder before they carry out the transfer or conversion.

To meet this requirement, the adviser giving advice on the transfer must provide the following confirmations to the pensions holder:

  •  the advice they gave has been provided which is specific to the type of transaction proposed by the pension holder;
  •  they have the required authorisations under the relevant legislation to provide advice on the transfer of safeguarded benefits
  •  the reference of the company at which they work; and
  •  the name of the member that was given the advice; and the scheme they belong to.

The trustee must then retain a copy of this confirmation and check that the adviser is on the Financial Services Register maintained by the FCA.

Best interests

In the document, issued last week, the regulator said that the pension reforms, which removed the requirement for an annuity, enabling fully-flexible withdrawals, are likely to lead some members to convert their safeguarded benefits into flexible benefits.

“We believe it is likely to be in the best financial interests of the majority of members to remain in their DB scheme,” it said. “However, accessing their pension flexibly may be better suited to the financial interests of certain members in their particular circumstances.

“In respect of all requests for a transfer of safeguarded benefits to acquire flexible benefits received on or after 6 April, trustees must check that the member has taken appropriate independent advice from an authorised independent adviser on the merits of the transfer.”

When a pension is smaller than £30,000, a member is not required to obtain advice for the purposes of making a transfer.

The requirement for an FCA-authorised pension adviser to give advice on transfers out of a defined benefit scheme was introduced in February as an amendment to the Pensions Schemes Bill 2014-15, brought to the House of Lords by Liberal Democrat Lord Newby.


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