The UK's Personal Finance Society has raised concerns that the FCA’s pension transfer advice cost template, set out in Annex 1 of a recent consultative paper, could mislead consumers.

As part of its consultative paper 19/25, the FCA suggests that every firm that advised consumers using a pension transfer specialist ought to produce a one-page A4 'summary' note at the front of all transfer suitability reports that explained why the advice that it was giving was suitable for the needs of those consumers. According to the FCA: "Advisors must disclose ongoing advice and all product charges they expect to levy in the first year if a transfer or conversion goes ahead, presented in pounds and pence. They must present these charges alongside the charges associated with the client remaining in their current DB scheme."

However, the PFS has warned the FCA about the example table that it has included in the paper and the potentially misleading nature of its conclusions.

Keith Richards, the chief executive of the Personal Finance Society, said: "For clients to enjoy the benefits of full transparency, they have to be able to compare different options on a like-for-like basis. This was a fundamental principle of the Retail Distribution Review, which separated out the purchase of advice as a service from the purchase of a product.

"We are concerned that the FCA’s template does not live up to these principles. It implies that the cost for ongoing advice in a workplace pension is provided free of charge by the pension scheme or the employer, whereas in practice the scheme member is usually required to obtain ongoing advice separately. This is especially true for transfers from a defined benefit scheme to a workplace defined contribution scheme, since some level of ongoing advice will be essential for the vast majority of clients in order to mitigate risks, including:

• ensuring the assets within the client’s overall portfolio are appropriate for their changing needs in retirement, including care needs;
• ensuring their drawdown strategy is tax efficient; and
• ensuring that they are drawing down an appropriate amount in the light of changing investment returns.

"An alternative approach would be for the costs of ongoing advice to be disclosed clearly, in pounds and pence, with a note that the costs of ongoing advice for defined benefit schemes may be lower, due to the fact that the benefits have a higher level of guarantees.”