PIMFA has defended contingent charging in a robust response to the FCA’s consultation on improving the quality of pension transfer advice.

While the trade association found the majority of the proposals set out by the regulator to be “proportionate and logical”, it parted company with the FCA on contingent charging and branded the suggestion it led to conflicts of interest “reductive.”

PIMFA said it, “did not necessarily agree with the central proposition of the paper; namely that the continued presence of contingent charging in the market increases the probability of unsuitable advice.”

A spokesman said: “We have come to this conclusion based on a number of concerns about the market which we feel have not been adequately addressed.

“In our view, removing contingent charging could push consumers to either being non-advised or seeking out the cheapest advice they possibly can.

“We cannot reconcile this with our belief that individuals should, where possible, seek out the best possible advice they can.”

PIMFA suggested that if contingent charging was to be axed the FCA should “consult closely with the industry on what alternatives could be put in place to help consumers address the sometimes high cost of advice.”

Simon Harrington, senior policy adviser at PIMFA, said: “We are not convinced that the removal of contingent charging will necessarily improve the quality of advice consumers will receive or indeed, improve their overall outcomes.

“Further, we would urge the regulator to consider the unintended consequences of imposing such a ban.

“Ultimately we do not believe that banning contingent charging is in any way complementary to the Government’s stated aim of closing the advice gap.

He added: “For many individuals, contingent charging is the only effective mechanism through which they can access quality advice due to the upfront costs involved.

“It is reductive to assume that contingent charging is both responsible for adviser conflicts of interest and indeed the only determinant of unsuitable advice.”