A healthy, efficient pension transfer market is an essential ingredient to helping people make the most out of their retirement savings.

As we all start up auto-enrolment pensions every time we join a new employer, for most people consolidating their discarded pensions under one roof makes the most sense. It reduces administration, tracking, and decision-making, especially as clients approach retirement. Deciding when and how to take an income from a pension pot is tricky enough, but having multiple pension pots confuses matters more.

But pension transfers are not without their risks. Done blind there is a small outside chance someone could inadvertently give up a valuable benefit — for example, guaranteed investment rates or protected tax-free cash or ages, especially under older more archaic contracts.

Advisers help their clients avoid these pitfalls. But what about the non-advised? The FCA put together proposals aimed to combat this. Unfortunately, these proposals have not been thought through, they have not been discussed with the industry, and they have not been tested with consumers. Instead, the Financial Conduct Authority has come up with plans that are anti-competitive and anti-consumer.

The FCA has proposed adding a new stage to the pension transfer process for non-advised consumers where the receiving provider has to give a comparison between the existing and prospective pension schemes.

The consumer can opt out, but those who do not must provide consent for the receiving provider to request detailed information from their current pension provider. The ceding provider has 10 days to supply this data, after which the existing provider has an additional three days to give the comparison to the consumer.

The FCA’s theory is that, armed with this information, the consumer can then decide whether to go ahead with the transfer or not. But there are several key reasons why this won’t work in practice.

First, these new rules only apply to FCA-regulated schemes, not occupational schemes or master trusts. Advisers will know from bitter experience that protections and guarantees are often held in older occupational schemes, but it seems unlikely that these types of schemes will volunteer to give information in a short timescale.

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