Thought

Providing Financial Advice to Scheme Members

Trustees and indeed employers are occasionally asked questions by scheme members which could potentially be construed as providing financial advice and require authorisation from the Financial Conduct Authority (FCA). In particular, members may ask questions about transfer values and retirement options.
In order to provide some clarity in these areas, TPR and the FCA has prepared a guide for employers and trustees on providing support with financial matters without needing to be subject to FCA regulation.

Authorisation

As a general principle, trustees do not need FCA authorisation as they are not in the business of arranging transactions or providing regulated advice and do not receive a commercial benefit from helping members. The guide sets out how employers/trustees can provide help without arranging or advising.

Communicating information about pensions

Employers/trustees can give information on the merits of participating in an occupational pension scheme. However, with regard to group personal pension plans, only factual advice can be provided as these arrangements are subject to ‘financial promotion’ restrictions.

Be careful not to give regulated advice

Questions such as the following should not be answered:

  • Which of the investment funds offered by the pension scheme should I choose?
  • Would I be better off putting my money into something instead of a pension such
    as an ISA or the Lifetime ISA?
  • Is it a good idea to transfer benefits under my old pension scheme into this scheme?

If an answer is provided, it may be regarded as regulated advice and if a scheme member acts on it, trustees/employers may be liable for any losses. Rather than answering specific questions, it is perfectly acceptable to direct scheme members to publicly available resources for information and guidance about financial matters, such as The Pensions Advisory Service and Pension Wise.

Providing support on accessing pensions

Employers/trustees wanting to help scheme members to understand their options for accessing their pension savings can do this in a variety of ways including:

  • Providing information on the options available and the right to transfer benefits.
  • Providing generic information about retirement options.
  • Signposting members to appropriate publicly available resources.
  • Helping members to avoid pension scams, for example, by signposting them to ScamSmart.

If a member is directly steered towards a specific product or provider, this could constitute carrying out
a regulated activity known as the ‘arranging activity’. However, it is generally acceptable to signpost members to sites where they can find their own financial adviser and it is also acceptable to signpost or arrange access to advice through a named FCA authorised firm.

Some employers/trustees are worried they could be considered to be making arrangements with a view
to transactions if they refer members for regulated advice. This is because members of an occupational scheme, having taken advice, may subsequently buy rights in FCA-regulated pension products.

A one-off exercise of identifying suitable advisers, such as providing a list of advisers that scheme members may like to use, is, by itself, unlikely to be considered to be the regulated activity of arranging transactions. Similarly, arranging for scheme members to get independent advice on a broad range of pension products they can transfer to, is likely to fall outside the regulated activity of arranging transactions.

Adam Simons

Senior Consultant

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