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IFA Group Stops Defined Benefit Work

Financial advice group LBEC to no longer offer advice on transferring out of final salary or defined benefit pension schemes after regulator's intervention

Holly Black 2 September, 2019 | 3:39PM

Pound notes

IFA firm LBEC has said it will stop advising on defined benefit pension transfers following a review by the FCA of that part of its business.

The regulator has been stepping up its scrutiny of advisers recommending that savers ditch their gold-plated defined benefit pension schemes after almost 400,000 savers switched out of the schemes in the past three years

LEBC is a financial advice group, which was founded by Jack McVitie in 2000. Investment group BP Marsh & Partners holds a 59.3% stake in the business and confirmed that LEBC had voluntarily agreed to “cease the provision of DB pension transfer advice and projects, forthwith”. It said the FCA had undertaken a review of LEBC focusing on the division of the business that provides DB pension transfer advice as part of its market-wide review of the defined benefit transfer market.

Since the introduction of pension freedoms in 2015, individuals have been able to move their pension pots out of DB or “final salary” pension schemes to defined contribution schemes instead.

While anyone with more than £30,000 saved must take advice before they can move their money, the FCA has raised concerns about the standard of advice being given.

In particular, it is worried about advisers recommending that savers switch out of the schemes because they can charge more than if they recommend that individuals keep their money where it is. The FCA is set to ban so-called contingent charging, amid concerns it encourages advisers to recommend transfers to clients that may not be suitable.

While there are often good reasons to move a pension pot, those who move out of DB schemes often give up valuable benefits including a guaranteed income for life and spousal benefits. The FCA says advisers should start from the standpoint that it is not in a client’s best interest to transfer out of a scheme.

BP Marsh was keen to reassure investors, saying that while the situation would reduce the value of LEBC, the firm was working on a number of initiatives and believes “the company will emerge in a satisfactory position” with regard to its financial results for the first half of the year. BP Marsh said it would “work closely with LEBC’s management team to return LEBC to the position it was in before the FCA review”.

The FCA did not comment.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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