Clarity from regulator needed on GMP transfers


The rules surrounding pension transfer top-ups due to contracted out benefits need clarity from the Financial Conduct Authority, experts have said.

Paul McGlone, president of the Society of Pension Professionals was appearing on the FTAdviser Podcast, alongside Andrew Boyt, pension transfers specialist and freelance consultant, to discuss how guaranteed minimum pensions will affect financial advisers work.

In October 2018, the High Court ruled Lloyds bank scheme trustees must equalise benefits between women and men who have GMPs because of contracted out benefits.

The ruling was considered a solution for a pension problem spanning almost three decades, and schemes are now having to decide how to equalise the contracted out benefits of their members.

One of the consequences is that pension transfer values could be increased. The cross industry GMP equalisation working group, launched in January, published a call to action in July for pension funds to start tackling the issue, stating the transfers could be paid as long as they included an allowance for the uplift in benefits.

Mr McGlone said: “I don't think GMP equalisation should prevent people from taking advice and acting on advice.

“If I’m a member with a £10,000 and a £300,000 transfer value, knowing that at some point down the road my pension might increase by 1 or 2 per cent and that my transfer value might get a top up of £5,000 to £10,000 - I doubt that will change the advice about if transferring is a good idea or not.”

He noted that a more practical issue is what the procedure is regarding the pension transfer value top-up.

He questioned: “Is it counted as part of the original transfer, can the financial adviser make a recommendation about what to do with that money, does it automatically follow to the original provider where the first transfer went, will that provider accept that money or will they say 'sorry, we're not interested because it is so small'.”

Mr Boyt noted that clarity from the regulator “is essential”.

He said: “If it is an advice point, there is an expectation that it is charged for.

“Handling in terms of putting it [the pension top-up] into the existing plan shouldn't be a problem in this day and age.

“It is a case if it does require a full analysis as a standalone piece of work, what is a reasonable charge for doing that, [and] does it require a suitability letter. It is all very unclear.”

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