Advice requirement for pension transfers could be scrapped in DWP plans
The abandonment of required FCA-authorised advice regulations over transfer of safeguarded benefits, is being considered by the Government
Introduction of this legal safeguard was brought in 2015, which meant members with over £30,000 of safeguarded pension benefits had to take financial advice in order to transfer or convert to a form where they could access their pension freely. The safeguard has however “produced additional complexities”, according to evidence which the Government has been made aware of. This has been an issue especially for those wishing to move savings to overseas pension schemes, due to moving abroad post-retirement.
Preliminary analysis from the Department of Work & Pensions (DWP) indicates the possibility of an estimated 700,000 individuals residing overseas with a contracted-out private sector salary which is yet to be paid in regard to pension benefits.
Previously, members looking to move funds abroad would look for financial advisers overseas due to their local awareness of rules and suitability surrounding tax schemes in their own place of residence. The Government has stated its own acknowledgement of the previous practice, as well as gathering its own information on how the current process could be developed and work in a more efficient way for those resident abroad.
The Government’s call for evidence stated: “By contrast, UK financial advisers may not wish, or be able, to offer this form of specialised transfer service covering the tax and pension rules of the member’s country of residence.” – therefore those wishing to transfer pension benefits may be left worse off financially in having to seek advice from two separate sources.
Allowance of residents to seek advice abroad once again has been considered, although the Financial Conduct Authority (FCA) fear facing obstacles where enforcing any set standard of advice is concerned. Alongside this would be the difficulties in verification of advice from an authorised administrator overseas at all.
A potential solution could be a set of recognised standards or required minimum qualifications for an individual to meet in order to be verified as a specialist in pension transfer. Such requirements may be set by regulatory UK bodies or ones in the individual respective jurisdiction.
Therefore, views on the scope for a more efficient and alternative process to minimise risk to residents based overseas are currently sought by the Government.