The Financial Conduct Authority (FCA) will change the way clients receive redress for bad pension transfer advice.
In an update published on its website this morning, the regulator said it would consult on changes in autumn with a view to implementing them by next spring.
The plans to change how redress is paid come after the introduction of pension freedoms increased the number of people seeking defined benefit (DB) pension transfer advice.
Currently clients receive redress based on calculations provided by consultancy PwC. This calculation includes figures such as inflation, interest rates and gilt returns to work out how much the client has lost by not being in their original DB scheme.
In its update this morning, the FCA said it was concerned that this method no longer put consumers back in the position they would have been had they not transferred out of the DB scheme.
As a result the regulator is looking to change how redress for clients who took bad advice is calculated.
It did not give any indication of how the method would change, but said a consultation would be launched later this year.
The FCA said that firms should not settle any complaints about DB transfer advice in full before new rules are introduced. Instead, it suggested offering a form of ‘provisional redress’ now before settling in full at a later date.
Concerns about bad pension transfer advice have featured heavily on the regulator’s agenda recently. Yesterday it published a warning to advice firms considering using introducers on DB pension transfer clients.
Chief executive Andrew Bailey also warned that pensions are the biggest challenge currently facing financial services at the regulator’s public meeting in July.