Warning sounded on rise of Woodford in-specie transfers

Due to this, some pension holders may find they are short of cash to make investments or purchases using their pension.

If the suspended fund value is £100,000 and is transferred in-specie into a Sipp or Ssas it will increase the maximum borrowing figure by £50,000.

This increase in borrowing could allow a client to make a purchase.

But for this to be viable, both the transferring and receiving schemes need to be able to accommodate the in-specie transfer of the fund and the fund must be capable of being valued. If the client is fully crystallised, partial transfers are not permitted.

William Burrows, retirement director at Better Retirement, told Financial Adviser he is currently considering an in-specie transfer for a client invested in the Woodford fund.

But he has warned that such a move may not always be the best solution.

Mr Burrows said: “A transfer is only in the client’s best interest if there is a clear advantage in meeting their needs. In many cases, the best solutions are also the simplest so care must be taken if a transfer is being made for complex reasons.”

Meanwhile, Tim Morris, independent financial adviser at Russell & Co, said that he would be cautious when advising clients on this option due to the possibility of them investing in commercial property.

Mr Morris said: “Fortunately, I moved the few clients I had invested in the Woodford fund out more than 18 months ago. Not that I foresaw the extent of the troubles back then.

“However, I would be reluctant to advise on the commercial property option, unless they were a business owner and sophisticated investor.

“I appreciate that could be seen as unwilling to help them, yet the damage has already been done in this scenario. It would very much be taking action after the horse has bolted.”

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