What is contingent charging, and why was it banned for pension transfers?
Contingent charging means the adviser is paid only if you go ahead with what they recommend; the FCA banned it for defined benefit pension transfer advice from 1 October 2020, with narrow exceptions.
Advice is a legal requirement before transferring safeguarded benefits worth more than £30,000, so the ban affects most people considering a transfer out of a final salary scheme.
Why it was banned
When an adviser is paid only if a transfer happens, there is a pull towards recommending it. The FCA found that conflict in defined benefit transfer advice and banned contingent charging for it. You now pay the same for the advice whether the answer is "transfer" or "stay".
The exceptions are for people in particular circumstances, such as serious ill health or serious financial difficulty. A firm relying on one must check that it applies.
Abridged advice
Alongside the ban, firms may offer abridged advice: a shorter, cheaper first stage that can conclude you should not transfer, or that full advice is needed. It cannot recommend that you go ahead.
What it means for cost
Because the fee is the same whatever the outcome, it is quoted in pounds before the work starts. Ask for it in writing, along with what happens if the advice is not to transfer.
Related definitions
- Adviser charge
- Initial adviser charge
- Fixed-fee advice
- Suitability report
- Pension consolidation
- What final salary transfer advice costs
Sources
General information only, not regulated financial advice or a personal recommendation. FinancialAdvisor.co.uk is not authorised or regulated by the Financial Conduct Authority. Figures are labelled with their source and date; they describe the market, not any firm, and are not quotes. Spotted an error? Report it and we will correct it.