The FSA has published its review of pension switching based on 30 firms and 500 transfers to personal pensions/SIPPs conducted since A-Day; this represented approximately 10% of transfer cases. Concerns were raised on the suitability of advice from advisers; comments were also made on Provider's actions.

Dealing first with advice issues, the FSA found unsuitable advice in 16% of the cases reviewed. Of course, one can conclude that 84% must have been acceptable, however the advice deficiencies included extra product charges not being justified or explained properly, loss of benefits from the ceding scheme, client attitude to risk not being matched to investments and the need for ongoing reviews not being covered - all basic stuff.

Turning next to the comments on Providers, the review reported that often Provider's projection rates were overstated by quoting 5%, 7% & 9% where funds were to be invested in cash - the FSA Conduct of Business Sourcebook (COBS) provides guidance on projection rates. The FSA also commented that TCF principles in many instances have only recently been implemented and that senior management systems & controls as set out in the FSA's 'The Responsibilities of Providers and Distributors for the Fair Treatment of Customers' (RPPD) are not always followed. It was also noted that whilst marketing material was general satisfactory, it may be helpful for Providers to provide more commentary for advisers on the use of relevant projection rates.

The point of all this is whilst this is a predominantly advice based issue, the scale of the problem could be potentially quite large. If we extrapolate the sample size of 500 cases representing 10% of transfer cases of which 16% are based on unsuitable advice, this means there are potentially 800 cases with unsuitable advice - even with an average £50,000 transfer value, that represents funds of £40m, probably transferred when investments were much higher than now. This is the last thing the pensions industry needs right now.

It also means that pensions, and by association SIPP Providers, will remain high on the FSA's radar with further reviews planned later in 2009. There is though a potential opportunity for SIPP Providers to provide guidance to advisers and implement, if not already in place, some of the 'good practice' examples contained within the FSA's review. The Review Paper can be found on the FSA's website and is well worth a read.

Kevin Jack - Enhance Support Solutions Limited

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