Scottish WidowsSep 9 2020

Gated fund stymies Scottish Widows transfer

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Gated fund stymies Scottish Widows transfer
ByAmy Austin

An adviser has slammed Scottish Widows for failing to facilitate a transfer because a fraction of his client's pension portfolio was in a gated property fund.

Phil Slater, director of Slater Financial, began the process of transferring a client's pension earlier this year.

He said the process was underway when the provider wrote to say the transfer could not progress because the client had some holdings in a suspended property fund.

In March, the coronavirus crisis caused open-ended property funds to close to redemptions and new investments because valuers could not value the assets within the funds with the required degree of certainty.

Scottish Widows wrote to advisers to explain some of its pensions invested in the suspended funds and from April it had to restrict withdrawals from, and payments into, these funds.

However, Mr Slater did not receive this letter until July - long after he had started the transfer process.

Moreover, he claimed Scottish Widows could lift its restrictions if the customer were to purchase an annuity, making the transfer ban rules seem arbitrary and risk "railroading" clients into going down an annuity route to access their pension.

Mr Slater told FTAdviser: “Scottish Widows' small print and red tape may state it can enforce a ban on transferring out, where a client is invested in property funds.

“But clearly it can override this suspension if the client purchases an annuity.”

He added: “I wonder how many other people looking forward to retirement have been railroaded into purchasing an annuity as the only choice to claim their retirement benefits now? The client may well end up with an unsuitable product. 

“This is totally at odds with the Financial Conduct Authority's specific aim of Treating Customers Fairly". He pointed to the FCA's document, which says TCF is to “minimise the sale of unsuitable products by encouraging best practice before, during and after a sale”.

He added: "This leaves a sour taste. Surely clients will be able to claim redress in the future?”

A spokesperson for the provider confirmed the restrictions do not apply to customers who wish to claim their retirement benefits - for example by purchasing an annuity either directly with Scottish Widows or with another provider. 

However, it cannot at the moment facilitate pension transfers to other providers.

FTAdviser also understands that while a full or partial transfer is not possible with this policy, a transfer can be carried out either when the fund suspension is lifted or six months after the transfer request was made in line with the policy terms and conditions.