Sipp provider stops accepting DB transfers

Sipp provider stops accepting DB transfers

Intelligent Money will no longer accept defined benefit transfers following the City watchdog’s latest warning about risks in the space.

In particular the Sipp provider has halted DB transfers into its products amid fears it could be held liable for adviser recommendations. 

The Financial Conduct Authority published a ‘Dear CEO’ letter last week (March 22) in which it told providers they should consider reviewing their DB activity since pension freedoms were introduced and assess the systems and controls in place to mitigate any risks posed by pension transfers.

Providers were also reminded they had a responsibility to identify risks from business coming in such as negative trends, including a high volume of transfers from a single scheme over a short period of time or customers transferring out of new DC arrangements soon after transferring from DB schemes.

This placed responsibility for accepting DB transfer business in the hands of providers even where there was an adviser involved.

It followed from the Berkeley Burke judicial review last year, which is expected to be appealed, in which a judge found the provider had a duty of care towards its clients and had to act as a gatekeeper even where the business was advised.

Julian Penniston-Hill, chief executive at Intelligent Money, said: "DB transfers were something we were never particularly active in until advisers started becoming active in it.

"Up until Friday afternoon we were able to rely on Conduct of Business Sourcebook (COBS), but with the Dear CEO letter, the goalposts have now been moved. We cannot assume the same level of liability as we did previously."

He added: "We are simply the first to announce it, I think other providers will follow suit as with no oversight over the process, you cannot accept any liability for it.

"My real concern is that now this principle has been established, it is not logical to restrict it to DB. My concern is that the FCA may apply this to all advised business. Providers would then, justifiably, stop dealing with advisers and start targeting the client base directly."

Intelligent Money is an intermediary-only provider and currently operates approximately £2bn in client assets. 

Scott Gallacher, chartered financial planner at Rowley Turton, said: "Given the recent CEO letter, and the ongoing Berkeley Burke case on pension trustees’ duties, it’s perhaps not very surprising that Intelligent Money have taken this decision."