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The UK financial regulator is under pressure to disclose more details about its investigation into the pension transfer market after it was revealed it had opened fewer than 70 mis-selling cases in three years.

Data obtained through a Freedom of Information request showed that since 2018 the Financial Conduct Authority has opened formal investigations into 29 firms and 38 individuals suspected of mis-advising clients to transfer their defined benefit pensions to riskier arrangements.

Around 170,000 transfers took place between April 2015 and September 2018, with a total value of around £83bn, according to FCA analysis. In 2018, it said less than half of the transfer advice it had reviewed had been suitable for clients.

The FCA has been investigating the multibillion pound pension transfer market since it became concerned in 2015 that too many savers were being wrongly recommended by regulated advisers to trade a secure defined benefit pension for a cash lump sum, known as a transfer.

“The number of investigations disclosed in the FoI seem disconcertingly low,” said Mick McAteer, co-director of think-tank The Financial Inclusion Centre and a former board member of the FCA.

“The FCA needs to produce detailed analysis to explain the gap between the number of consumers potentially affected, the number of firms and individuals potentially involved in providing poor advice, and the very small numbers of cases the FCA is now investigating.”

The FCA has said advisers should start from the position that a defined benefit pension transfer is unlikely to be suitable for their client. But in 2018, it found advice on defined benefit pension transfers was suitable in fewer than 50 per cent of the advice recommendations it had reviewed. It pledged to follow up with every active firm in the market in 2019.

Of the 2,426 firms providing transfer advice during the period reviewed by the FCA, 1,454 or 60 per cent of the total had recommended 75 per cent or more of their clients to transfer. At the time, there were more than 6,500 pension transfer specialists working across the market.

In response to the FOI request, the FCA said in 2018 it opened 21 investigations into firms and 25 investigations into individuals suspected of misconduct in providing defined benefit transfer advice. In 2019, this fell to four investigations against firms and six individuals. So far in 2020, it has opened 11 cases, with four against firms and seven against individuals.

“In June this year, the FCA banned contingent charging for advisers offering defined benefit transfer advice, which was a significant step towards tightening regulation of the industry,” said Mark Turner, a managing director at consultancy Duff & Phelps, which made the FOI request to the FCA.

“The FCA’s decision to go ahead with this ban is part of a broader agenda of them taking decisive action where markets are not seen as supporting the best interests of consumers.”

FCA enforcement action against firms where it sees serious misconduct can result in fines and individuals banned from operating in the financial services industry.

The FCA told the Financial Times its investigations had led to dozens of firms exiting the market.

“In our latest review of the defined benefit pension advice market, in which we assessed 85 firms responsible for 43 per cent of advice given in the market, we subjected 55 firms to a detailed file review assessment, and 32 firms have since stopped giving advice,” the FCA said.

“We speak regularly to firms about what they should do to remedy unsuitable advice, including whether to conduct a past business review, and continue to monitor emerging risks in the market, so that we can act swiftly to protect consumers if we need to.”

Where a defined benefit transfer has been made on the basis of unsuitable advice, the individual may be able to make a complaint to the firm and, if this is upheld, be restored to the position they would have been in had they not received the advice.

In the year to date, the Financial Ombudsman Service, which settles disputes between businesses and their customers, had received around 500 complaints from individuals claiming they had been misadvised on a pension transfer.

Dominic Lindley, director of policy with think-tank New City Agenda, said the FCA should be doing more to raise awareness about unsuitable transfer advice.

“There have been widespread failures in the market for defined benefit transfer advice affecting thousands of consumers,” he said. “The FCA should use its powers to implement a full scale redress scheme under section 404 of the Financial Services and Markets Act.”

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