Pension Transfers
Written by Charlie Palmer on 10/08/2018

On 21 June 2017, the FCA published a CP17/16 setting out its proposals for advice relating to pension transfers and Opt Outs PTOO with safeguarded benefits and for DB to DC transfers. The FCA did not give an estimate of the total value of payments being made from DB schemes. 


Mercer’s estimate withdrawals from final salary schemes to be £50bn in the last three years alone! (as reported by the FT). They claim that some 80,000 per annum are taking their CETV benefits! Banks and insurers are the key firms pushing out high CETVs because they have conservative investment policies, based on gilts which therefore push out high discount rates and thus high transfer values. 


Henry Tapper in an excellent article published here henrytapper.com claim that senior executives who are often trustees of the same schemes are taking their benefits, but then keeping quiet on the transaction so that other deferred pensioners in the scheme don’t get to hear about it and all rush for the exit at the same time. This risks busting the remaining deferred’s, who may face a cash crisis as a result of the high volume of transfer requests. Trustees of the DB schemes are in a very difficult position. 


The FCA proposals in CP17/16 aim to cater for the increased demand for pension transfer advice, the higher transfer values (up 25% due to bond yield compression at about 30-40 times income, according to the FT) and the new pension freedoms. 


The new rules outline its expectations of advisers and pension transfer specialists. The FCA requests views on proposals including the following:

  1. Introducing a rule that requires all advice in PTOO to be a personal recommendation. This is not quite as daft as it sounds, when you consider that many firms apparently use the PTOO just to check files only but not actually advise. Some PTOO’s are, we learn, not even qualified to advise. IFAC must be naïve not to have realised how some firms go about their business – frankly just gaming the system. This was never our interpretation of the rules, and the rules will now get changed anyway to bring them into line. 
  2. Introducing guidance on the role of a pension transfer specialist when outsourcing the business in its entirety to another firm.   

In addition, the FCA invites discussion (but does not currently propose any rules) on a number of issues that relate to the transfer and conversion of safeguarded benefits.  These include: 

  • The qualification and experience requirements for a pension transfer specialist – new requirements will be published in due course.
  • The different models used for meeting the requirement for advice to be given or checked by a pension transfer specialist.
  • The application of streamlined advice for the conversion or transfer of safeguarded benefits.


FCA acknowledge that PTOO is likely to become even harder post reform that is planned in early 2018.

There is no mention of appointed representatives, who remain unable to act as PTOO...http://ifac.eu/content/fca-confirm-network-members-may-not-conduct-pension-transfers-nor-transfer-safeguarded

The consultation closes on 21 September 2017. 


The FCA intends to publish the final rules in a policy statement in the first quarter of 2018.


IFAC notice little help with insistent clients is provided. 


IFAC remain of the opinion that the world has moved on and helping the client to harm themselves – by transacting against your advice - is no longer acceptable.

More pertinently, by helping even in small part with the transaction the firm will retain the liability in full for the consequences.

And the impact on PII is obvious.

All news