Third Sipp firm shuts door to pension transfers

Third Sipp firm shuts door to pension transfers

Westerby Trustee Services has become the latest Sipp provider to stop accepting defined benefit transfers following the FCA’s warnings about risks in the space.

The firm, based in Leicester, told FTAdviser it has suspended all new DB transfers until it gets clarification from the Financial Conduct Authority about providers' rules and responsibilities.

Westerby is the third provider to halt DB transfers after the FCA published its ‘Dear CEO’ letter on March 22. Earlier this month, DP Pensions said it would not accept DB transfers until the FCA clarified what was expected of pension providers, while Intelligent Money took the same action last month amid fears it could be held liable for adviser recommendations. 

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Victoria Briggs, head of operations at Westerby, said: "Until we have greater clarity on the implications of the Dear CEO letter we considered it prudent to stop accepting DB transfers."

In the letter the FCA warned providers they should consider reviewing their DB activity and assess the systems and controls in place to mitigate any risks posed by pension transfers.

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

The regulator has since come out to state providers will not be held responsible for the suitability of any advice given, but it expects them to understand the underlying drivers and whether a transfer is detrimental to consumers.

However, providers are unhappy with this clarification, saying it changed little from how they had perceived the letter in the first place.

The letter followed 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.

Victor Sacks, director and IFA at VS Associate, said: "Whilst I can’t see how providers can be responsible for the advice given, they are the backstop of the process.

"The real issue is the toxic investments some Sipp providers allow on their platforms. If they are going to allow certain funds that invest in, say property in Spain or Brazilian forestry, then they should make clear these are high risk funds or place restrictions on what investments are on these platforms."