What percentage of final salary advice was unsuitable?

Unsuitable pension transfer advice

In December 2018, the FCA published a report that found that suitable financial advice had only been given in 48.1% of final salary/defined benefit pension transfer cases.

Although the study that led to the report was based on targeted FCA work and so is not representative of the whole transfer market, it does highlight the issue of unsuitable financial advice being given in the majority of final salary pension transfer cases. The FCA stated:

“We are disappointed to have found that less than 50% of the advice we reviewed was suitable. Our results are based on our targeted work and are therefore not representative of the whole market. However, it is particularly concerning that, despite our feedback to the sector, firms are still failing to give consistently suitable advice”


It is unacceptable that pension transfer advice should persistently remain at such a low level in comparison to investment advice.”

[To read the full article released by the FCA, please follow this link.]

What’s even more worrying is that even if a transferred pension has performed well, a number of other factors** means it is still possible to make substantial financial losses, the extent of which may not become evident until much later in life. It is therefore crucial that people who have transferred their final salary pensions speak to a pension specialist to find out whether the advice they were given was suitable.

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** Factors

  • The value of your pension pot is no longer guaranteed to increase. Since it no longer benefits from indexation, and instead is subject to market fluctuations, it doesn’t automatically increase in line with either the RPI or CPI. Quite the opposite, its value can go down and in some cases, can end up at zero.

  • Your ‘put back’ figure will very probably be higher than any investment gains, meaning that even if your new investments perform reasonably well, they are unlikely to give you a return that equals the calculated value of your DB pension had you not transferred out of it.
  • Your pension pot is no longer protected by the Pension Protection Fund (PPF) which guarantees 90% of the calculated pension value in the unlikely event the DB  pension scheme fails. If you have transferred out of a DB pension and your new pension investments fail, the responsibility is on you to prove you have been mis-advised and to claim for compensation. You may have to go through the financial Ombudsman Service (FOS) or the Financial Services Compensation Scheme (FSCS), both of which cap the amount you can be awarded, no matter how much you have lost.
  • Your pension will likely be subject to ongoing charges and commissions, which will eat away at the value of your pension pot over time.

  • You lose your guaranteed ‘Death Benefits’. Defined Benefit Schemes guarantee up to 50% of the income upon death to your beneficiaries depending on the provisions in the scheme. Although you can leave 100% of your pension investments to your loved ones in your will, the value is not guaranteed.


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