Final salary pension transfer advice has come under the spotlight more and more over the years. In the mid to late 90s, specialist pension exams were introduced and it became a regulatory requirement in the UK for a Pension Transfer Specialist to be responsible for providing the advice.
With the advent of the FSA (Now FCA) register, it was possible to see who was registered to give final salary pension transfer advice. However, although the requirement remains for a specialist the register does not distinguish between advisers anymore.
While it is a UK requirement to be licensed and qualified to provide this highly specialised area of advice, it was not the case if the adviser was based outside of the UK. This became a serious concern due to the quality of pension advice given and the lack of proper oversight, poor investment advice and no proper analysis or discussion about sustainable income in retirement. Large numbers of people, who should never have been candidates for a transfer from a final salary pension, were moved into inappropriate products that will have a hugely negative effect on their retirements.
2015 Pension Rules-Final Salary Pension Transfer Advice
From 2015, the rules changed, all transfers of Safeguarded Benefits valued at over £30,000 must be advised by a Pension Transfer Specialist that is regulated by the FCA. Clearly, this includes final salary pension schemes.
This leads me to the point of this blog.
When someone asks their previous pension trustees for a Cash Equivalent Transfer Value they have a Statutory Right to receive one up the final last 12 months of the scheme retirement age. After that, it is down to trustee discretion.
The CETV statement will normally have a 3 month expiry date, after which the CETV is no longer valid and will have to be recalculated. Pension members have a choice, they can pay for another one themselves, that can cost a few hundred pounds, or wait 12 months from the first statement and ask for another one.
Most trustees will only accept the request for a transfer once all the paperwork is signed and on their desk, within the expiry date.
While 3 months may sound a long time, we are finding that many people often leave the decision to ask for advice until too late. If there is one decision that should not be rushed, it is the decision to transfer a final salary pension scheme as there is no reverse gear!
Financial planners are used to dealing with deadlines, comes with the territory, but a tight deadline on such an important and irreversible decision is not something we would want to be faced with. One only needs to look at the recent British Steel pension transfer debacle to see what happens with tight deadlines.
Given the complexity of final salary pension transfer advice it is, by its very nature, a detailed process that should not be rushed. Someone that has received a report and recommendation needs time to digest the contents and consider the next move carefully. People that leave it to the final 2 or 3 weeks to take advice are putting undue pressure on the Pension Transfer Specialist and are not doing themselves any favours.
If someone wishes to consider taking advice, why not find the adviser firm you wish to use first and get to know the firm and its terms and conditions? Getting the CETV and then researching the market is eating into the 3 month window and increases the chance of a regretted rushed decision, or the missing of a transfer value that later could be lower. Don’t leave it too late.
Act in haste and repent at leisure.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published on 20th February 2018
- QROPS – SIPP- What is the Final Salary Transfer Value?
- Final Salary Pension Advice- Expats
- Pension Transfers and Triage | Expat Advice
- Who should transfer their UK Pension?
- Final Salary Pension to QROPS
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