On the go: New guidance from the Financial Conduct Authority and the Pensions Regulator has clarified what constitutes unregulated financial advice, allowing schemes to offer cash equivalent transfer value quotations and annuity estimates, but banning drawdown illustrations.
Earlier FCA guidance had raised the prospect that any scheme providing its members with modelling tools, for instance to compare their existing entitlements with potential alternatives to be won through transferring out, would influence member behaviour and so constitute regulated financial advice.
Some experts warned that offering unsolicited CETV quotations would likewise stray into the territory of regulated advice.
However, in the guidance published on Tuesday, TPR and the FCA made clear that it is acceptable for schemes to offer CETV quotations and annuity estimates, though drawdown illustrations — which are deemed too speculative — are not allowed.
The document emphasised the distinction between offering information and offering advice, and between offering factual (allowed) and illustrative (not allowed) information.
Any CETV quotation or annuity estimate given in an attempt to “steer” a member towards a particular decision would constitute regulated advice.
The guidance stated: “We consider that you should not give scheme members illustrative, as opposed to factual, figures that compare the outcomes a member might get if they keep a safeguarded benefit or transfer/convert it into flexible benefits.
“This kind of analysis might steer a member towards a specific course of action, which is part of the regulated advice process.”
Schemes can “signpost” members toward publicly available resources provided by the Money and Pensions Service, however, in order that they inform their own decisions.
Commenting, Sir Steve Webb, former pensions minister and partner at LCP, said: “Most forward-thinking trustees and employers want to help their scheme members to make good choices, but some are nervous that in doing so they may be crossing a regulatory boundary.
“This new guidance provides welcome clarity and shows that schemes can help in a range of ways, from appointing [independent financial advisers] for members to use to providing illustrations for members of their options within and beyond the scheme.
“This new clarity should lead to a growth in the number of trustees providing help and guidance for members around their pension options,” he added.
