Release Date: 1st December 2022

To access the original FCA document, click here.

Summary

The FCA has fined Pembrokeshire Mortgage Centre Limited (PMC), trading as County Financial Consultants, £2,354,331 for providing unsuitable advice to consumers to transfer out of the British Steel Pension Scheme (BSPS) and other defined benefit (DB) pension schemes. This action was taken due to PMC’s significant failings in delivering appropriate advice, particularly to BSPS members, many of whom were in vulnerable positions.

Key Points:

• Fined Entity: Pembrokeshire Mortgage Centre Limited (PMC)
• Reason for Fine: Unsuitable advice to transfer out of DB pension schemes, primarily the BSPS.
• Amount Fined: £2,354,331
• Time Period: Advice given between 2014 and 2017
• Affected Consumers: 420, with 93% advised to transfer, earning PMC over £2 million in fees.

Key Takeaways for Other Firms:

• Tailored Advice: Ensure advice is customised to the client’s specific circumstances, avoiding generic templates.
• Adequate Resources: Maintain sufficient resources to manage an increase in advisory cases without compromising the quality of advice.
• Vulnerable Customers: Pay special attention to vulnerable customers, providing clear, objective, and expert advice.
• Documentation and Justification: Maintain thorough documentation and provide adequate justification for advice given, especially when advising to exit a DB pension scheme.
• Compliance with Regulations: Stay compliant with all regulatory requirements to avoid penalties and ensure customer protection.

Summary of Findings:

PMC advised 420 consumers, nearly two-thirds of whom were BSPS members, to transfer out of their DB pension schemes. The FCA found that 60% of this advice was unsuitable, higher than the overall BSPS transfer rate. PMC’s advice often used generic, non-tailored suitability reports containing contradictory and misleading statements. The firm also lacked adequate resources to handle the volume of cases, further impacting the quality of advice. This led to many consumers, including those needing guaranteed income for retirement and long-term care dependents, being advised to transfer out inappropriately.

Consumer Impact:

The advice led to significant financial losses for many consumers, resulting in over £13.3 million in compensation paid out by the Financial Services Compensation Scheme (FSCS). The average transfer value per customer was approximately £293,000. The FCA has emphasised the importance of keeping DB pensions due to their guaranteed income benefits, which cannot be replicated by other investments.

Conclusion:

PMC’s significant failings highlight the critical need for tailored and well-documented financial advice, especially for vulnerable customers considering transferring out of DB pension schemes. Firms must ensure they have adequate resources and comply with regulatory standards to protect consumers and avoid substantial penalties. The FCA’s actions serve as a reminder for firms to prioritise customer interests and maintain rigorous compliance with financial advice regulations.