Round Up quarter four 2020

feature | 21 threesixty r rules explained r rules became effective on 1 October. Firms committed to providing their future in this market, have even more to think about. • Introduction of CPD requirements, specific to pension transfer advice, for pension transfer specialist (PTSs) • Introduction of new data requirements on PTS advice (any pension transfer business that needs to be given or checked by a PTS) and professional indemnity insurance (PII) • Amendment of a number of technical areas of FCA rules and guidance to clarify and extend existing requirements The ban on contingent charging Contingent charging occurs when the client only pays for the advice if the transfer goes ahead. It therefore creates an incentive to recommend a transfer and the FCA believes it can therefore contribute to unsuitable advice. The ban on contingent charging means that (subject to very limited exceptions) firms will be required to charge the same amount for advice on pension transfers and conversions, whether or not the advice results in a recommendation to transfer. The contingent charging ban covers all related charges such as advice on where to invest the transferred funds and implementation charges for arranging the transfer. Implementation fees were common prior to the ban on contingent charging. Because of the requirement for the charge to be the same regardless of the outcome of the advice, implementation fees cannot be charged. If you give advice on where any transferred funds are invested and you will carry out related services, such as arranging the transfer, you must include these charges within the overall cost of providing full pension transfer advice. Once monies have been invested, any ongoing services should be covered by your ongoing charges. Any charging structure that results in a different fee for advice ‘to transfer’ than ‘not to transfer’ will be in breach of the contingent charging ban. You may charge different amounts to different clients where there are genuine and legitimate reasons for the difference. For example, if you have set out different charges in your charging structure for different types of client, such as for existing clients, introduced clients, or those with multiple schemes. But you should be able to demonstrate clearly that variations to your charges don't undermine the FCA’s contingent charging ban. Remember that the FCA prevents additional payments made to third parties, such as introducers, if the introduced client subsequently transfers their pension. This is to avoid firms seeking to circumvent the ban. There have been a number of questions regarding the viability of taking the advice fee from the transferred funds when a transfer takes place. The contingent charging ban does not include a ban on fees being taken from transferred funds, subject to the proposed receiving arrangement being able to accommodate this. Where the recommendation is to remain within the ceding scheme, the client will need to pay for the advice directly. Abridged advice Abridged advice is designed as a mechanism to filter out those clients for whom a pension transfer or conversion is unlikely to be suitable, before they pay for full advice. The abridged advice process involves fact finding to support the advice given, considering the benefits of the client's existing scheme, but does not include an appropriate pension transfer analysis (APTA) or transfer value comparator (TVC). The outcome following abridged advice can only be either a recommendation not to transfer or a conclusion that the abridged advice process is not sufficient to make a decision about whether a transfer is suitable. Naturally, you can charge a fee for providing abridged advice but the FCA does not expect this to be equivalent to the charge for full pension transfer advice.