The ban on contingent charging in defined benefit (DB) pension transfer advice, which comes into force today (1 October), is “the end of pension freedom in all but name”, TLT partner, Noline Matemera, has said.

The UK law firm partner warned that the ban could lead to reduced competition and a consolidated DB advice market offering “largely the same” advice to consumers.

The Financial Conduct Authority’s (FCA’s) ban on contingent charging was announced on 5 June 2020 and aims to remove conflict of interest and financial advisers securing payment once a transfer has occurred.

Matemera stated that the ban would see the DB advice market “contract” and “possibly grind to a halt”, making it difficult for consumer to access the same wide range of options.

“The fact that the regulatory goalposts have shifted so rapidly on DB pensions transfer advice is part of the problem,” she added. “This has also occurred against a backdrop of intense regulatory engagement and focus on this sector.”

Matemera noted that the FCA had previously adopted “a more collaborative and cooperative approach” with the pensions industry, which “provided a clear pathway to compliance and ensured firms were able to marshal the resources necessary to adapt to new regulatory demands”.

“While this approach may take a bit more time, it allows firms to understand the regulator’s objectives and secure buy-in,” she continued. “The increasingly systematic use of ‘Dear CEO’ letters or more interventionist supervision however points to a worrying future of rule by regulatory fiat.

“With the ban taking effect tomorrow, the DB advice market is very likely to further consolidate, and we could be left with a small selection of adviser firms providing largely the same advice to consumers.

“Where would this leave pension freedom, the new options it offers and competition in this sector? It would mean the end of pension freedom in all but name.”

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