Pension Transfer Frequently Asked Questions

Abridged Advice is a short form of affordable advice that enables our Pension Transfer Specialist (PTS) adviser to:

• Provide the client with a personal recommendation not to transfer safeguarded pension benefits such as those held in a Defined Benefits (DB) pension scheme. OR
• Tell the client that it is unclear whether they would benefit from a pension transfer based on the information collected through the Abridged Advice process. The PTS must then check if the client wants to continue to Full Advice, and if they understand the associated costs.

A PTS must not consider the client’s proposed receiving scheme as part of Abridged Advice.

Where the outcome from Abridged Advice is unclear, the client is under no obligation to proceed to Full Advice and, indeed, the Financial Conduct Authority (FCA) expect that subsequent Full Advice will result in a recommendation not to transfer for some clients, once the PTS has been able to analyse the full impact of transferring to a specific alternative product, such as a workplace pension scheme, flexi-access plan or annuity.

Full Advice will build on the information gathered during Abridged Advice but go on to provide an in-depth analysis of the safeguarded pension benefits, as compared to an alternative pension product.

The type of situation in which the ‘carve out’ test will be met will be based on the Money and Pensions Service (MaPS) definition of over-indebtedness, which has 2 parts:

• keeping up with domestic bills and credit commitments is a heavy burden, and

• payments for any credit commitments and/or any domestic bills have been missed in any 3 or more of the last 6 months

If a client would immediately meet this test if they had to pay for advice on a non-contingent basis, then the FCA considers they can be treated as meeting the test.

To be eligible, the client must also be within 6 months of Minimum Pension Age, as otherwise a transfer would be unable to meet their need if it proceeded, as they would not be able to access the funds on transfer. An exception would be where you are also in serious ill-health and qualify for both ‘carve-outs’.

Potential clients with life-limiting medical conditions can self-evidence their conditions. We are required to record the evidence the client provides. For example, evidence may take the form of existing documentation from a registered medical practitioner, including details of treatment. The FCA does not expect anyone to incur extra costs or significant time in getting evidence. GP health records are increasingly available online and hospital records can be requested from the relevant trust.

An upper age limit of age 75 applies for this ‘carve-out’ as, in the event of a suitable transfer, there are tax advantages for beneficiaries inheriting money purchase pension funds where the scheme member’s death occurs before age 75.

This ‘carve-out’ will be restricted to those who do not have the means to pay for advice, including those who would be likely to be forced into debt if they did not meet the tests for the carve-out and had to pay for advice on a non-contingent basis.

Introduced Clients

The client’s own IFA who introduces the client to Pension Income Planning Ltd, supplies us with details of the preferred destination of funds, i.e. preferred provider and investment choice, in the event of a recommendation to transfer

Where a transfer is deemed suitable, we will utilise the chosen destination of funds if this requirement can be met and if the chosen funds fit within the risk profile and objectives of the client.

The introducer is asked to provide fund/portfolio fact sheets and analytical research to assist with our due diligence process, and to help us in approving the selection.

However, the introducer should be aware that Pension Income Planning Ltd are required by the FCA to consider a workplace pension more suitable than any preferred alternative product, unless it can be proven otherwise. The workplace pension must be considered as the default solution in the event of a recommendation to transfer.

PFS Good Practice Guide: When advising on a pension transfer, the advice must take account of the proposed destination of the transfer funds if a transfer proceeded.

This includes both the proposed scheme and the proposed investments in that scheme.

The FCA rules do not prevent two separate advisers providing the pension transfer advice and the advice on the proposed receiving scheme and its investments. However, the FCA expect the two advisers to work with the same information about the client and have in place robust processes to ensure that this happens.

The investment advice is included in the contingent charging ban and levelling of fees.

Direct Clients

Pension Income Planning Ltd will provide details of our preferred destination of funds, in line with client objectives and assessed risk profile score i.e. preferred provider and investment choice, in the event of a recommendation to transfer.

However, Pension Income Planning Ltd are required by the FCA to consider a workplace pension more suitable than any preferred alternative product, unless it can be proven otherwise. The workplace pension must be considered as the default solution in the event of a recommendation to transfer.

The Financial Conduct Authority Policy Statement 20/6 published in June 2020, stated that when considering the receiving scheme for a full pension transfer, the client’s current or most recent WPS must be initially considered as suitable, unless an alternative non-WPS can be shown to be more suitable.

The only valid reasons stipulated by the FCA for dismissing a WPS as not suitable are:

• The WPS will not accept DB transfers
• Retirement is imminent (within 12 months) and the WPS does not offer the desired retirement strategy.
• The client can evidence a history of investing in a range of retail investments and funds, either on a self or advised basis.
• The alternative recommended plan has demonstrably lower charges than the WPS

Our website provides a complete 'client journey' from initial contact, through triage to submission of all the paperwork needed to access Abridged Advice. Everything can be completed online. Documents are then automatically sent onto the team at Pension Income Planning Ltd.

Should you have any queries about the process or wish to discuss a specific scenario, you can contact the office on 01277 600518 or by email to pip@pipplanning.co.uk

A Cash Equivalent Transfer Value (CETV) is required to enable us to provide Abridged Advice to a client who has deferred benefits in a Defined Benefit (DB) scheme. Scheme administrators are required to provide a CETV within 3 months of the request being made. *

The CETV is guaranteed for 3 months from the date of calculation. During this time we must obtain all relevant information from the scheme and the client, analyse that information, meet with the client to provide Abridged Advice, which is confirmed in a written report and, if deemed appropriate, move to Full Advice, which will include full analysis of the DB scheme benefits and the receiving plan or scheme, a further client meeting and a detailed recommendation report.

If a transfer recommendation can be made and is accepted, we must get the necessary paperwork, and any other essential requirements, to the ceding scheme before the end of the 3-month period.

Given the strict timescales, it is preferable that the CETV is not obtained prior to referral to Pension Income Planning Ltd as this will shorten the time available to us to complete the process and the CETV may expire.

We will regularly chase outstanding information and keep both client and where applicable, their introducer informed of progress

Other types of safeguarded pension benefits, such as Section 32 Buy Out plans with Guaranteed Minimum Pension and deferred annuities, do not generally have guaranteed transfer values and the timescales can be shorter.

*extended to 6 months during the Covid-19 pandemic.

We can provide introducers with an email copy of the Abridged Advice report and the Full Advice recommendation report, as sent to the client. We can also provide a recording of the client meetings.

Introducers will be kept informed of the progress of the case at each stage and the outcome, once we have made our recommendation.

No. In accordance with the terms of our Pension Transfer Service Introducer Agreement, upon completion of the advice process and the investment of monies, we actively promote to the client that any new plan should be transferred to the introducing adviser’s servicing agency. The introducing adviser will be responsible for submitting the client’s letter of authority to the plan provider in a timely fashion.

Yes. Your commitment will be to have an annual zoom meeting with Pension Income Planning Ltd to discuss funds, performance and keeping your plans on track.

You will also seek advice before taking income or lump sums from the funds and depleting the pot. This will apply to self-investors and investors where Pension Income Planning Ltd have made the fund recommendations.

Alternatively you may select an IFA who you trust to address the ongoing servicing.

Pension Income Planning Ltd are a Pension Transfer Specialist (PTS) firm and do not operate in any other area of advice.

Our Pension Transfer Service Introducer Agreement states that the PTS shall “not solicit or seek to entice away from the introducer any person that is introduced to them…”

Our client agreement also confirms the limitation of our services.

It is important that the trustees of your pension arrangement(s) are made aware of who you wish to receive any benefits that are payable on your death. In DB schemes, there will be restrictions on who can receive a dependant’s pension, such as a spouse or other Registered Legal Partner and/or qualifying children, in accordance with the scheme rules. However, there may be options for any additional lump sum death benefits to be paid to other persons. You should contact the scheme trustees to ensure that your wishes are known. They will have a nomination form that you can complete and return to them.

There is more flexibility in modern individual personal pension arrangements as you can nominate any person(s) of your choice to inherit your pension fund on your death, without restriction. Individual providers will have their own Expression of Wish forms which you can complete and lodge with them. 

On your death, the trustees will take an Expression of Wish form into consideration when determining who should receive the death benefits, but this is not binding on them

The term 'vulnerability' can cover many circumstances and research suggests that a large proportion of the population will be deemed 'vulnerable' at some point in their lives.

Vulnerability can be due to physical or mental health reasons, current personal circumstances such as divorce or bereavement or financial circumstances.

We always endeavour to meet specific needs and will: -

• Arrange meetings at the time of day that best suits you.
• Ensure you can be in the location of your choice.
• Break our meetings down into bite-size chunks and include comfort breaks as often as required.
• Take into account any additional needs you may have e.g. in relation to hearing or visual impairment.
• Explain everything in plain language and as clearly as possible.
• Extend an invitation to your IFA, family member or person of your choice to support you during your meetings.

Please let us know of any specific needs you may have, that would assist you during the advice process.

All client meetings are video and audio recorded via Zoom, for monitoring and training purposes, are for your protection and may be referred to in the event of any requirement to review the advice provided.

Yes, you will be offered a copy of each meeting, which can also be requested by your own IFA, and will be provided subject to you giving your permission.

Video recorded meetings are an integral part of our process and therefore we will be unable to offer a review meeting to anyone not wishing to accept this requirement.

To address initial conflicts of interest, the Financial Conduct Authority (FCA) requires that advisers must charge the same monetary amount for advice to transfer as for advice not to transfer. Contingent charging, i.e. the charge only applying if a transfer goes ahead, was banned with effect from 1^st October 2020.

This means that where a client wishes to take Full Advice, the fee is agreed in advance of any work being carried out on a Full Advice basis and must be paid by the client regardless of the outcome of that advice.

In the event of a recommendation to transfer, it may be possible for the fee to be paid from the transferred funds.

There are exceptions from the ban, known as ‘carve-outs’, for specific groups of consumers with certain identifiable circumstances.

The FCA has designed the ‘carve-outs’ to let most clients who might benefit from a transfer, and who would otherwise find it difficult to afford advice, continue to pay for advice on a contingent basis.

These clients fall into 2 groups: -

• Those who may be facing serious financial difficulty, for example, losing their home because they are unable to make mortgage or rental payments.
• Those in serious ill-health who have a specific illness or condition that causes a materially shortened life expectancy.

Both the serious financial difficulty ‘carve-out’ and the serious ill-health ‘carve-out’ require that a client is unable to pay for full pension transfer advice.

Prior to engaging Pension Income Planning Ltd, a client must firstly complete our initial triage stages which includes viewing the Money Alive educational video journey. A fee of £75 inclusive of VAT applies, which is payable via the homepage of this website.

Where the client makes the decision to engage Pension Income Planning Ltd to provide advice on safeguarded benefits, including Defined Benefit pensions and Section 32 Buy Out Plans with Guaranteed Minimum Pension and Deferred Annuities, our fee for access to Abridged Advice is £960 inclusive of VAT. This covers the cost of a basic analysis of the benefits of one transfer value for the client, as well as a detailed review of the client’s individual circumstances, needs and objectives. Where there are 2 or more periods of service these are chargeable as separate transfer values.

Abridged Advice fees are payable before we commence work on the case.

Where the decision is made to progress to Full Advice, further fees are payable.

For transfer values under £100,000 a fee of £4,300 per scheme being reviewed.

For transfer values over £100,000, a fee of £5,800 + 1% of the transfer value per scheme being reviewed.

The applicable Net Abridged Advice fee will be offset against the Full Advice fee.

Money Purchase Fund such as Additional Voluntary Contributions (AVCs) connected to the DB scheme

Money Purchase funds, such as Additional Voluntary Contributions (AVCs) that are linked to a DB scheme and must be moved at the same time as the DB scheme, will be transferred if the DB benefits are transferred, without analysis, advice or any additional charge. The exception to this is where the funds are safeguarded benefits, in which case analysis and advice will be provided and, if transferred, a 1% charge, based on the most recent transfer value issued by the provider at the date of your Personalised Charges Document, will apply.

Where the money purchase funds do not need to move at the same time as the DB scheme, Pension Income Planning Ltd will not provide advice or facilitate a transfer. Your own or any other IFA with the necessary authorisation can provide separate advice on these benefits.

*Where the client goes on to Full Advice, the applicable Net Abridged Advice fee will be offset against the Full Advice fee.

For non-standard Self-Invested Personal Pension investments and Small Self-Administered Scheme propositions, our terms for full advice include an additional 20% of the Full Advice fee, after deduction of the net Abridged Advice fee already paid.The additional 20% fee is to cover the additional liabilities that apply with these types of advice.

Our fee for Full Advice is not contingent on a recommendation to transfer and is payable regardless of whether the advice is to transfer or not transfer.

If you change your mind and let us know before we have commenced any work on your behalf, we will refund a portion of your Abridged Advice fees as follows:

In these circumstances, for each scheme, £600 of the initial net fee already paid, will be refunded, with Pension Income Planning retaining the balance to cover administration costs.

Please note, the £75 fee paid for accessing the Money Alive educational journey is non-refundable.

YES Pension Income Planning Ltd. can pay introducers.

Firstly, an allowance of £200, on request, for each client referred to us who completes the online journey and makes payment. This is a totally separate marketing allowance and has no impact on the initial fees charged to a client.

Secondly Should a client be suitable to progress to Full Advice, we can also facilitate the addition of a fee up to 1% of the transfer value added to our own fees. This is capped at £20,000.

This fee is agreed between client and introducer at outset and will be collected by Pension Income Planning Ltd at conclusion of the Full Advice process, regardless of the outcome of that advice.

Any introducer fee you agree and charge your clients is fine and outside of the 1% cap.

The addition of any fees by the introducer is optional but must be on a non-contingent basis.

Many of our introducers elect to take no fee. This can be shown as a benefit to your clients against what could have been charged.

If an introducer applies their own charge up front for their work or referral, and that is paid directly to them, then Pension Income Planning Ltd. do not need to be notified of this.

Pension Income Planning Ltd does not deal with any form of opt out advice from a DB scheme, even where the link is solely an old salary link (see next question). For such clients, we send a standard letter stating we cannot act.

Where a client has recently opted out of their scheme, we will issue a letter to that client and copy in their introducer, if applicable.

This will confirm that Pension Income Planning Ltd were not involved in the advice process to opt out of the DB scheme and that the client should confirm their understanding and acceptance that it was their own decision and not made solely to allow a possible transfer.

We will deal with the case as normal from then on as we cannot opt the client back into the scheme.

For some clients, opting out may be a good idea, especially if it is only a salary link; however, we do not give advice on this area.

If a client is an employee who is no longer a member of their employer’s DB scheme but is still working for the same employer, e.g. the scheme closed, in most cases they are classed as a 'Deferred Member' of the scheme. However, with some schemes, such an employee may retain a link to their scheme benefits and will be deemed to be an 'Active Deferred Member'.

For example:

• There may be a salary link to the DB scheme, meaning that if the pension at retirement, based on the employee’s latest salary, exceeds the scheme revaluation of the DB pension at date of exit from scheme, the higher will count.
• There may be increased contributions to any new Defined Contribution (DC) scheme whilst the individual remains a deferred member of the DB scheme.

Any links are deemed valuable, so breaking the link is never advised. Clients who find themselves still working for an employer where they have built up DB benefits and who are considering transferring, should contact their HR department or their scheme trustees to check if any links exist.

If we discover an undisclosed link, we will be unable to advise, and we will write to the client to explain the implications of being an Active Deferred Member. In these circumstances, for each scheme, £600 of the initial net fee already paid, will be refunded, with Pension Income Planning retaining the balance to cover administration costs.

Pension Income Planning Ltd will also write to the client to explain the implications of being an Active Deferred Member.

The vast majority of our clients will, by default, be classified as RETAIL CLIENTS.

Retail Clients are afforded the most protection, will receive more information and have access to the Financial Ombudsman Service and the Financial Services Compensation Scheme.

It is possible for an individual to be classified as an Elective Profession Client provided that

A. Pension Income Planning Ltd. undertakes an assessment “of the expertise, experience and knowledge of the client that gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the client is capable of making his own investment decisions and understanding the risks involved.”

AND

B. The client can meet at least 2 of the following 3 strict criteria: -

1.the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters;

2.the size of the client's financial instrument* portfolio, defined as including cash deposits and financial instruments, exceeds EUR 500,000;

3.the client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged;
(the "quantitative test")

Elective Professional Clients will receive a lower level of protection than Retail Clients. Professionals may not necessarily have the same rights under the Financial Ombudsman Service and the Financial Services Compensation Scheme.

If you believe that your client would satisfy these tests and does wish to be classified as an Elective Professional , then a three-step process must be followed.

1. The client must state in writing to the firm that it wishes to be treated as a professional client either generally or in respect of a particular service or transaction or type of transaction or product;

2. The firm must give the client a clear written warning of the protections and investor compensation rights the client may lose; and

3. The clientmust state in writing, in a separate document from the contract, that it is aware of the consequences of losing such protections.

Where Pension Income Planning Ltd is not satisfied that the client meets the criteria to be classified as an Elective Professional, then he will be classified by default as a RETAIL CLIENT.

UK citizens currently residing abroad, who are deferred members of a UK DB scheme and seek advice regarding the potential transfer can only receive advice from Pension Income Planning Ltd whilst physically in the UK.

1. The client must hold a UK passport.
2. The advice must be on a UK based DB pension.
3. In the event of a transfer recommendation, the funds can only go to a UK based provider.
4. A provider must be selected willing to take on the case.

Time is of the essence for clients with this prognosis, therefore we will provide a fully compliant yet streamlined process that can be conducted in one meeting, concentrating on their unique set of circumstances.

As this is a shorter process, the fee for this will be £4,000 for the analysis of the benefits of one DB scheme. Any additional schemes will be charged at an additional £1,000 per scheme.

These are not contingent on a recommendation to transfer and are payable regardless of whether the advice is to transfer or not transfer.

The fees are lower than the standard fees, to reflect our aim of compassionate and caring advice in difficult circumstances. Current scheme members are allowed to avail themselves to this service.

If you are over the age of 50 but under 55 years of age, we have to inform you that the general view is that unless there is compelling evidence, it will be difficult to justify any recommendation to transfer.

There should not be a recommendation to transfer just for the pursuit of investment growth. If you are under age 55, you have no access to the funds via Pension Commencement Lump Sum or the drawing of income. Additionally, anyone born after 6 April 1971 will be unable to access any funds until the age of 57. Please read the following section carefully before paying any fees and consider whether you would meet any of the criteria listed.

Typically, we find the scenarios below can be looked at more favourably: -

1. The client is an IFA, professional investor, pension scheme trustee or a similar background with extensive fund knowledge and an understanding of risk, reward and loss.
2. The client is in considerable ill health that will impact or create serious concerns about their longevity.
3. The client has a property SIPP or Small Self-Administered Scheme and understands commercial property investment and is looking to buy their own commercial property.
4. The client is so wealthy that the transfer value is an insignificant part of their overall assets.
5. The client is close to age 55 and has a specific goal that needs actioning on or shortly after their 55^th birthday.

Typically, we do not advise to transfer where none of these scenarios apply.

Your overall financial and family situation, including other pensions and savings, would need to be established and considered as well as other relevant factors, such as whether you are relocating abroad.

A fully reasoned case scenario would be needed for us to consider providing advice to anyone aged between 50 and 55.

IMPORTANT: Advice cannot be provided for anyone under the age of 50 other than in very exceptional circumstances.

The Financial Conduct Authority have stipulated that every person who wishes to consider the transfer of a safeguarded pension arrangement, such a DB scheme, must receive advice from a Pension Transfer Specialist (PTS) in the form of a personal recommendation.

For Full Advice, the PTS must conduct an appropriate pension transfer analysis (APTA) including a transfer value comparator (TVC). The aim of the APTA is to help to demonstrate if a personal recommendation to transfer or not, may be in the person’s best interests. The APTA should take into account personal circumstances (e.g. attitude to risk, tax implications, access to state benefits and life expectancy), any compromises the person is prepared to make for the potential benefits of a transfer, the alternative options available and the financial strength of the existing scheme.

The TVC element of the APTA is intended to compare, in a simple format, the cash equivalent transfer value offered by the existing scheme with the cost of purchasing the same benefits via an annuity, using various assumptions prescribed by the FCA.

This will be presented to the client and discussed at the Full Advice meeting.

A Pension Increase Exchange (PIE) is an offer that some DB scheme trustees make to their members to give up future non-statutory pension increases in respect of benefits accrued pre-April 1997, in return for a higher initial pension.

Accepting this offer would mean that the purchasing power of the pension income may be eroded by the effects of inflation.

On the other hand, it would allow for more income to be available in the early years of retirement when outgoings may be higher.

The Pension Protection Fund (PPF) was set up in April 2005 to ensure that all members of eligible pension schemes receive compensation for pension payments which may otherwise have been lost because the sponsoring employer went out of business. If a scheme is wound up when the company is still solvent, the company is required to pay enough into the scheme to enable the benefits to be completely secured with an insurance company. If the company were to become insolvent and is unable to make the payment, the Pension Protection Fund might be able to take over the scheme and pay a reduced level of benefit to members.

Generally, lump sum death benefits from pension arrangements are exempt from IHT, but this may not be the case where a person transfers funds from one arrangement to another, such as a Defined Benefit (DB) pension scheme to a Flexi-access pension plan, whilst in ill-health and then dies within 2 years of the transfer.

This would need to be reported to HMRC, who will decide whether the “transfer of value” caused a loss the person’s estate, thus avoiding IHT that would otherwise have been due.

HMRC have not published any guidance on how to calculate the “transfer of value”. The individual’s legal representatives would need to negotiate with HMRC regarding this, based upon individual circumstances. However, the following is an example scenario which HMRC have said would be an acceptable calculation method.

Mary, 60, was diagnosed with a terminal illness with a life expectancy of only 12 months and she transferred her defined benefit (DB) pension to a flexi-access plan. Her DB transfer value was £500,000 and she died within 24 months of completing the transfer.

The value of Mary’s benefits before the transfer is then compared against the value of her benefits after the transfer, assuming that Mary had fully withdrawn her flexi-access fund when the transfer completed.

The value before the transfer is based on the transfer value of £500,000 plus allowance for growth during Mary’s expected lifetime, say 5%, which can then be discounted, over the same period, to the present-day by, say, 10%. This gives a value of £472,500. (Note. The growth and discount rates are just examples and would need to be agreed by HMRC).

The value after the transfer is £500,000 less any income tax deducted if this amount was fully withdrawn. Assuming this was Mary’s only pension fund and she had no other income, the net value could be £346,250 (£125,000 tax-free cash and the balance subject to English income tax rates in 2021/22).

HMRC would consider the loss to the estate as a result of the transfer to be £126,250 (£472,500 - £346,250) and IHT may be due on that amount.

There is no “spousal exemption”, e.g. even if Mary had nominated her spouse as the sole beneficiary of the death benefits, IHT may still be payable.

It is important to bear this in mind if you are considering a transfer and are in serious ill-health.

All figures are for illustrative purposes only. The growth and discount rates used would need to be agreed with HMRC.