Our consultation period has now closed. Thank you to all those who responded. As we consider responses to the consultation paper (CP22/6), we will continue to publish answers to requests for further clarification.
This includes further information on the use of the Defined Benefit Advice Assessment Tool (DBAAT) and Investment Advice Assessment Tool (IAAT).
We will continue to update these FAQs as appropriate.
When was the DBAAT commissioned?
The Defined Benefit Advice Assessment Tool (DBAAT[1]) was commissioned by internal committee in Summer 2018. Its objective was to support reviewers making consistent judgements on the suitability of Defined Benefit (DB) pension transfer advice, and to capture better information on pension transfer advice to help our supervision of and feedback to firms. It was built internally using policy, supervisory, enforcement, legal and actuarial expertise and advice. It was rolled out for use in early 2019 and published on our website for firms in January 2021.
Before commissioning the DBAAT, we used the Investment Advice Assessment Tool (IAAT) to assess the suitability of all pension and investment advice, including advice on DB pension transfers. Since launching the DBAAT, the IAAT continues to be used for all non-DB transfer pension advice and investment advice.
What training is given to users of the DBAAT?
When we published the DBAAT in January 2021 we provided an instruction guide[2] to assist assessors. We also created 9 short videos[3] to help individuals understand the key points of the DBAAT and how to approach an assessment.
For internal purposes we developed a two-day training workshop for all users of the DBAAT.
- Training pack[4]
- Example case study[5] (this case study is fictitious to facilitate training and does not contain details of a living individual)
What qualifications are required for using the DBAAT?
When we published the DBAAT in January 2021, we published it as a tool which firms could choose to use when assessing their own DB transfer advice. Use of the DBAAT is not a requirement, and there are no minimum qualification levels for users.
Where we undertake reviews of DB transfer advice as part of our supervision and enforcement investigations of firms, we use the DBAAT. Our assessors, and those responsible for quality assurance, must hold the relevant qualifications to be a Pension Transfer Specialist (PTS). This includes an appropriate advisory level 4 qualification.
Where we engage third parties to undertake reviews of DB pension transfer advice on our behalf, we expect the same qualification standard to be applied.
How were the BSPS file reviews quality assured?
Where we completed the file reviews, the approach we took was to apply quality assurance to all files rated as having unsuitable pension transfer advice plus an additional 20% of the remaining files not rated unsuitable.
A selection of files were also subject to legal review on an ad-hoc basis. For files that were reviewed by a third party, the third party completed quality assurance and we carried out an additional level of quality assurance on their results.
How were the 365 individual file reviews 'weighted', as referenced on page 93 of CP22/6?
The technical appendix to our statistician’s report (page 92-93 of CP22/6[6]) confirms that the 365 files reviewed were 'weighted'. As outlined 'To apply weights is a statistical means of re-adjusting or re-balancing a sample, so as to be reflective of the population from which the sample was drawn.'
In the interest of transparency, we have decided to publish additional data on these 365 files to show how these were weighted to enable us to form our view on the quality of BSPS transfer advice across the market.
The data has been anonymised to remove direct reference to the individual firms that provided the advice as well as other information which might indirectly identify an individual firm.
We have published two documents:
- Our data set[7] which shows all 365 file reviews and includes the outcome of the review and weight ascribed to each file.
- A note providing an explanation[8] of each data point in our data set.
What relevant qualifications were held by those that completed BSPS file reviews?
Those responsible for carrying out quality assurance on DB transfer file reviews hold Level 4 and PTS qualifications.
Annex 6 of CP22/6[6] splits the 365 files reviewed into 302 ‘Group 1’ files and 63 ‘Group 2’. Of the Group 1 files, 97 were reviewed before the launch of the DBAAT. In these cases, the IAAT was used and were completed by supervisory staff who may not have held PTS qualifications. However, all files reviewed as unsuitable, plus an additional 20%, were quality assured by a qualified PTS.
For the remaining 205 Group 1 files, and all 63 Group 2 files, the first stage assessors were all PTS qualified.
Were all 365 BSPS files reviewed using the DBAAT?
Of the 365 file reviews:
- 268 were completed using the DBAAT (205 of the Group 1 files and all 63 of the Group 2 files)
- 97 files were completed using the IAAT (all from Group 1 files)
The 97 files reviewed using the IAAT were reviewed during our initial supervisory work into BSPS in late 2017/early 2018, before the DBAAT was commissioned or built. The 97 files were drawn from 13 firms. Based on the IAAT assessment, seven out of 13 of the firms were referred for further work which ultimately led to those files being reviewed using the DBAAT.
How did you rate the suitability of the investment advice in the 365 BSPS files?
As outlined in the DBAAT instruction guide[2] there are two possible suitability assessments:
- The pension transfer advice – whether the firm took reasonable steps to make sure the recommendation to transfer or remain in BSPS was suitable.
- The investment advice – whether the firm took reasonable steps to make sure the recommended proposed arrangement for receiving the transfer is suitable.
While the DBAAT allows for the assessment of both pieces of advice, during the course of our 365 file reviews we did not always assess the investment advice. This was for several reasons, including cases where:
- the PTS did not recommend the proposed arrangement (the transfer advice was given in a two-adviser model with another firm providing the investment advice)
- the firm had failed to collect the necessary information to advise, and as a result we did not have sufficient information to assess the investment advice
- the pension transfer advice was our primary concern
Of the BSPS files reviewed:
- we assessed the investment advice in 257 cases
- we found the investment advice unsuitable in 44 cases
Who completed the 365 file reviews?
Of the 365 file reviews that we are relying on in CP22/6:
- the 97 file reviews completed using the IAAT were completed by FCA staff, with the standard level of QA applied
- the 268 files (205 Group 1 files and all 63 Group 2 files) were completed by an external third party, Grant Thornton, engaged to complete the file reviews (including QA) on our behalf
We trained Grant Thornton on the DBAAT and provided additional quality assurance during the review process.
Are the figures underpinning the asset retention calculation in PS22/4 drawn from the same evidence referenced in CP22/6?
Yes. Our asset retention intervention in PS22/4[9] is based on the same evidence of widespread failing identified in CP22/6. This is why the prescribed calculation is PS22/4 uses a:
- 46% unsuitability rate
- 16% average financial loss
Did we meet with stakeholders before the consultation period?
Yes. Prior to the publication of our CP22/6 consultation on a redress scheme in relation to the British Steel Pension Scheme we held a number of meetings with stakeholders. This is because CONRED requires the FCA to undertake a pre-consultation with key stakeholders. See the slides used[10].
Did we meet with stakeholders during the consultation period?
Yes. CP22/6 was published on 31 March 22 setting out the detail of our proposals. During the consultation period we met with over 250 stakeholders through a range of events to ensure we gather as much as evidence as possible through this process. See the slides used[11].