Personal Pension  

Provider refuses non-advised transfers amid death tax cuts

As providers, advisers and other industry commentators line up to praise the government for harmonising rules and removing so-called ‘death taxes’ on annuity payments to surviving spouses, several experts have warned of the consequences of a likely “flurry” of defined benefit transfers.

One provider told FTAdviser that ahead of the raft of pension reforms coming in April it is refusing transfers except where the client was fully advised, and that other providers and advisers should introduce measures to protect against inappropriate transfers.

Claire Trott, head of technical support at Talbot and Muir, said her firm is currently insisting that all transfers are advised, undertaking checks on intermediary qualifications, and requesting that the adviser signs a declaration to assert the client is suitable and not ‘insistent’.

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Following on from earlier moves to remove the 55 per cent charge on death for all defined contribution pensions and value protected annuities, in yesterday’s (3 December) Autumn Statement, chancellor George Osborne confirmed the tax would also be removed from joint life and guaranteed annuities.

The change means annuities will be treated equally with DC pensions in almost all instances, a boon for a sector many predict will be hit hard by incoming pension freedoms.

But a number of industry figures including Fidelity’s Alan Higham and Ms Trott also warned the latest changes only emphasised the discrepancy in treatment for savers in defined benefit pensions and would serve to encourage transfers.

Ms Trott said that there is a risk of a “flurry” of DB transfers before the April 2015 deadline, when the rules will change to require all defined benefit transfers to be advised and to prevent transfers from ‘unfunded’ public sector schemes.

At present a person can request the transfer themselves and do not need to take advice unless the provider insists they do. Ms Trott said, however, it is quite hard to find providers who are willing to accept non-advised transfers.

“We are seeing people interested in doing that [transferring before April] and I think it is down to providers as well as advisers to make sure they are only taking on appropriate business and our stance for that is they must be fully advised.

“We won’t take on execution-only transfers of DB schemes [and] we will not take on insistent clients; if the adviser won’t advise on a transfer we won’t do it. We insist that the adviser signs a separate declaration saying that they are advising on this and that they are not an insistent client.

“We would check that the person signing the declaration to give advice has correct qualifications and the company is eligible to give advice.”

Ms Trott added that there is a risk there will be delays to transferring out due to the sheer volume of people trying to get it done before the deadline, which could reflect poorly on DB trustees.

“You’ve got the NHS and other unfunded public sector schemes that, come the changes, won’t be able to transfer.