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COBS TP 1 – Treatment of Pension Transfers and Pension Conversion – Rules on Pension Transfer Advising

PostedJune 24, 2025
UpdatedJune 24, 2025
ByAndy

1. Chapter Summary

COBS TP 1 provides specific rules and guidance for firms advising on pension transfers and pension conversion. The chapter aims to ensure that firms act in clients’ best interests when advising on transferring pension benefits, particularly from defined benefit (final salary) schemes. This is a high-risk area where poor advice can lead to significant financial detriment, so the FCA sets enhanced requirements to protect consumers.

2. Applicability

This chapter applies to firms providing advice or guidance to retail clients on pension transfers or pension conversion arrangements within the UK regulated activities framework. It is particularly relevant for defined benefit pension transfers but can also apply to other pension transfer scenarios. It applies only when advice or recommendations are made about transfers or conversions.

3. Key Rules and Their Meaning

  • COBS TP 1.1.1R – Requirement to Assess Appropriateness Firms must undertake a detailed assessment of whether a pension transfer or conversion is suitable for the client before making a recommendation. In practice: Firms need to gather comprehensive client information, including financial circumstances, needs, and goals, and consider alternatives.
  • COBS TP 1.1.2R – Disclosure Requirements Firms must provide clients with clear, timely disclosures about the risks and implications of transferring pension benefits, including loss of guaranteed benefits. Meaning: Clients should fully understand the potential downsides and opportunity costs involved in pension transfers.
  • COBS TP 1.2.1R – Specialist Knowledge and Competence Advisers giving pension transfer advice must have sufficient specialist knowledge and competence. Nuance: Firms must ensure advisers are trained and qualified specifically for pension transfer advice due to its complexity.
  • COBS TP 1.3.1R – Obtaining a Pension Transfer Value Analysis (PTVA) Firms should obtain a PTVA from an independent source to support the advice given. In practice: This independent valuation helps provide an objective assessment of the pension transfer value.
  • COBS TP 1.4.1R – Recordkeeping Firms must keep comprehensive records of client information, suitability assessments, advice given, and client decisions. Meaning: Detailed documentation supports accountability and evidences compliance with FCA requirements.

4. Interpretation Notes / FCA Expectations

  • The FCA expects firms to adopt a client-centric approach with thorough fact-finding and suitability assessments tailored to individual circumstances.
  • Firms should document why a pension transfer or conversion is appropriate or not, referencing regulatory guidance and the client’s best interests.
  • FCA guidance stresses the importance of transparent communication about risks, particularly the loss of valuable guarantees and protections associated with defined benefit schemes.
  • Firms should ensure their advisers keep up to date with evolving regulations and industry best practices in pension transfer advice.

5. Practical Considerations for Firms

  • Implement detailed fact-finding and suitability assessment procedures specifically for pension transfers.
  • Provide clear, standardized disclosure documents explaining risks and alternatives.
  • Maintain adviser training and qualification records demonstrating pension transfer expertise.
  • Use independent Pension Transfer Value Analysis (PTVA) providers to support advice robustness.
  • Keep comprehensive records of client meetings, advice reports, and client decisions.
  • Regularly audit and review pension transfer advice processes to ensure ongoing compliance.

6. Related Handbook References

  • COBS 9 – Suitability and Appropriateness (general advice standards)
  • COBS 19 – Best Execution and Client Order Handling (for order execution in transfers)
  • COBS 10 – Client Communications (disclosure and clarity)
  • PRIN 2A – FCA Principles for Business (client interests, due skill)
  • SYSC 10 – Systems and Controls (oversight of advice processes)

7. Regulatory Focus / Enforcement Risk

  • Pension transfer advice is a high FCA enforcement priority due to past mis-selling and client detriment.
  • Firms face significant scrutiny on suitability assessments, adviser competence, and risk disclosures.
  • Inadequate documentation or failure to warn clients about risks often triggers FCA investigations.
  • FCA continues to monitor pension transfer advice quality through thematic reviews and complaint analysis.