Final Salary Pension Transfer Critical Advice

Final Salary Pension Transfer

What does it mean for a pension member of a final salary pension scheme to receive a positive recommendation and why has the UK regulator, the Financial Conduct Authority, deemed positive recommendation Final Salary Pension Transfer Critical Advice?

There has been a significant amount of change regarding final salary pension transfer advice over the past few years. In 2018, a requirement from the FCA was for the pension transfer specialist to ‘make a recommendation’. This inferred the decision whether to transfer or not should not be left up to the investor or an unregulated party.

One would have hoped that this would have stemmed the practice of regulated parties from encouraging insistent clients to transfer, but it seems it did not.

Final Salary Pension Transfer- What is an Insistent Client?

We will talk about this in the context of non-UK advice firms giving advice to British expats and others that have moved outside of the UK and have UK final salary pensions.

Bear in mind, a non-UK adviser that is not a registered pension transfer specialist is not allowed to make recommendations for a final salary pension transfer or even a recommendation to remain a deferred member of a final salary pension scheme.

The practice I am talking about is where a non-UK advice firm works with a UK FCA registered pension transfer specialist who is authorised to provide Final Salary Pension Transfer Critical Advice. The registered UK adviser is liable for the advice given and most likely, one would hope, would not recommend a transfer if it is clearly not in the clients’ best interests. Unfortunately, the FCA requirement was that advice must be taken- not that it must be adhered to! So, firms (unscrupulous firms) were providing the advice and then allowing the client to ignore the advice, and insist on the transfer proceeding. Hence the term “Insistent Client”.

Separately, trustees of pensions are being told that advice to the client had been provided, but not told the part about the client being insistent against best advice. Overseas the UK pension holders are then coached to become insistent by their local adviser, who actually was unregulated in the eyes of the FCA, i.e. not qualified, nor regulated to be giving pension advice.

Final Salary Pension Transfer-Coaching the Client

What does this mean?

I will use an example from last week. A well-known non-UK advice firm contacted a UK final salary pension member and said that they would ‘arrange’ for a UK pension transfer specialist to provide a recommendation about whether to transfer or not. The client was told the likely advice will be ‘not to transfer’ but that this is just a normal bureaucratic issue and that the client does not have to accept the advice. In fact, the client was basically told to ignore the advice!

The non-UK adviser then lists all the benefits of how a transfer may help someone (whether these actually apply to the individual or not) and points out that, after all, it is the client’s money and they should be free to do whatever they want with it. Having been fired up as insistent, the client then ignores he advice to remain in the scheme and transfers.

Final Salary Pension Transfer Critical Advice implication

As the client is now following their own course, and that of an unregulated adviser, and he/she has ignored the advice to remain in the scheme, it means that the advice is no longer covered by regulation, not covered by the Ombudsman, nor the adviser’s professional insurance. The clients’ mistake means they themselves are now responsible for their own decision and own outcomes (and these can be disastrous in the hands of the unregulated adviser).

My question is this- Why would you go against the advice of a UK regulated adviser but follow the advice of a non-regulated (as far as a final salary pension transfer is concerned) adviser?

Analogy of Buying a House and a Pension Transfer

Imagine you wanted to spend several hundred thousand pounds on a house (because many pension values, e.g. CETV, – link are of that magnitude.) and you require a bank mortgage.

The bank insist on a structural survey report but then say: ‘It is likely that the Chartered Surveyors structural survey will recommend against buying this property as you will be significantly worse off if you go ahead. However, we (the bank) are happy for you to ignore the report and we will lend the money to you anyway. It makes no difference to us, as you will sign away your rights and take all the risk, and if anyone suffers financially it will be you’

Would you do this? Would you not regret the day you ignored the report if things work out badly?

Knowing this now, would you buy a house with a loan on that basis, take all the risk and have no come-back whatsoever, or would you leave well alone!

Final Salary Pension Transfer-Summary

This analogy is not a lot different from what is happening NOW in the non-UK pension advice market. It simply does not make sense to transfer a pension against best advice.
Therefore, Positive Recommendation Advice is critical for client best outcomes. What we mean is that the advice should be unequivocally to transfer as best advice for you as a client individually or you should remain in the pension scheme.

Many UK pension providers (including SIPPs) are onto this and will now only accept a transfer if the client provides evidence that the UK regulated advice actually recommended a transfer.

Will that stop this practice, especially overseas with unscrouplous firms telling people to ignore the advice they receive from the experts? Possibly not, as the non-UK advisers will then recommend a QROPS to get around the issue of following best advice. You have to understand that they will do this purely to get paid – it is the only way they can generate earnings from you often, which means there is a conflict of interest and the outcome for you is not their priority – getting paid a commission on transferring your money is their priority.

Caveat Emptor- check out you UK and non-UK adviser’s qualifications, experience and licences and always make sure you speak to the UK regulated adviser if you are recommended to act against the advice in his/her report.


Article Date 15th March 2022

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.


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