The FCA has published a new webpage with information on how to support consumers with characteristics of vulnerability when providing pension transfer advice.

The page emphasises that when consumers seek advice about transferring a defined benefit (DB) or other pension benefits, firms should be alert to potential indicators of vulnerability. Firms should create an environment where consumers feel they can disclose their needs and have structures in place to provide suitable support.

The FCA warns that consumers may seek financial advice when they are worried about the financial situation of their scheme's sponsoring employer or the scheme itself, or where they are in serious financial difficulty themselves, and in these circumstances may be particularly susceptible to scams or frauds.

The FCA sets out a number of steps firms should take in the context of their approach to vulnerability, as well as ways in which the risk of harm may be mitigated. The latter include:

  • clear and fair explanations of how the features of different schemes may assist consumers with characteristics of vulnerability; 
  • flexible responses to consumers’ needs, for example changing the channels for advice from online to face-to-face services; 
  • recognition that consumers in financial distress may need financial guidance and signposting to other organisations that can help them;
  • considering when characteristics of vulnerability, like financial literacy, might impact the firm’s ability to assess attitude to transfer risk or fact finding.

The webpage also sets out examples of situations leading to a greater likelihood of good outcomes and, conversely, situations where the likelihood of poor outcomes is increased.

The FCA notes that the Consumer Duty has raised the standards it expects of firms, and the example scenarios provided in particular should prove a useful additional resource for firms looking to implement or review appropriate advice processes.