What are the new rules concerning pension transfer advice?

My old pension scheme has informed me that I need to seek financial advice before I can make a transfer. What are the rules here?

Question asked by Brian O'Callahan
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Answered by Stephen Moore

The biggest constraint of the new pension freedoms  

In an effort to improve the protection afforded to savers with deferred rights in defined benefit (final salary) schemes, when Chancellor George Osborne introduced the new pension freedoms in April 2015 they included the new legal requirement for anyone contemplating a transfer worth over £30,000 to seek professional advice from an appropriately qualified adviser.

The other assets you hold will be relevant in this instance as your adviser will need to include them in their analysis if they are to come to a decision on whether any potential transfer is in your best interests.

Evidence of financial advice is required

There are no shortcuts here. The scheme from which you intend to transfer will require evidence that you’ve received the appropriate level of advice before it can authorise the transfer.

Your scheme won’t require evidence that your adviser has recommended the transfer – only that you’ve received the advice. Technically, you can choose to ignore your adviser’s counsel and proceed with a transfer even if they’ve recommended against the exercise.

However, although there’s no requirement whatsoever on the receiving scheme to ensure that you’ve received advice, it’s become clear that not only do the great majority of the larger SIPP providers require evidence that you’ve received advice, they won’t accept a transfer unless it’s been recommended by your adviser.

Does my pension adviser have to recommend a transfer?

The law does not require that your adviser provides a positive recommendation of any potential transfer or its suitability to your circumstances, only that you’ve received professional advice as part of your decision-making process. The fact that SIPP providers are increasingly insisting on a positive recommendation from your adviser doesn’t reflect the state of the law.

It reflects their unwillingness to be held potentially liable at a future date, either when the law changes or when those who press ahead with transfers that haven’t been recommended by their advisers find that the move didn’t pay off for them years down the line, and potentially seek legal redress.

defined benefit transfer advice
requirement to seek advice
pension freedoms 2015
pension freedoms and transfers
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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