On 15 January 2021 the FCA launched its Defined Benefit Approach Assessment Tool (“DBAAT”) to help firms understand its approach to assessing the suitability of advice on transfers out of defined benefit (“DB”) schemes. This should help compliance consultants, auditors, insurers and trade bodies to gain clearer insight into what suitable advice is. It can be used to assess advice given before October 2020, with an updated tool for transfer advice given from 1 October 2020 expected in coming months.
The tool should help organisations assess complaints about whether suitable transfer advice was provided. The tool is designed to determine whether the necessary information to advise the client was obtained and whether any failings have caused a consumer loss. When the updated tool for advice given from 1 October 2020 onwards is provided this should be informative for trustees considering whether suitable defined benefit pension transfer advice has been obtained by a member.
The tool takes the format of a template (which should be completed for each advice file that is assessed) and an instruction guide. It can be used to assesses DB transfer advice including that involving an Enhanced Transfer Value and investment advice on the proposed scheme. The template used by the tool and instructions are to review the giving of advice on pension transfers and arranging of transfers for insistent clients.
For any organisation looking to use the tool it can be accessed here.
The FCA has repeatedly made clear that it considers DB transfer advice to be a significant issue. In light of the DBATT trustees may want to more actively ensure suitable advice is available and if appropriate check with any identified IFAs whether they have considered the tool in reviewing their complaints processes. At a time when authorised firms have been exiting the market for advising on pension transfers, perhaps this development will help stem the flow. Trustees (and members) need a supply of advisers to keep the system working.
It can be used to assess advice given before October 2020, with an updated tool for transfer advice given from 1 October 2020 expected in coming months.