Age Partnership Warns Of Pension Permissions Blockage

Many IFAs and advisers missing appropriate permissions or expertise to deal with pension transfers and conversions – which are growing in popularity.

Rise in referrals from clients who have seen their transactions stopped as a result.

Age Partnership, a leading retirement income specialist, is warning of the growing prevalence of rejected pension transactions, as advisers may not have the appropriate permissions in place to help all the customers instructing them.

Age Partnership's adviser service reveals a growing trend in the number of approaches from clients on the back of failed transactions via IFAs without the appropriate permissions in place. Simultaneously, the number of direct referrals from advisers who are aware of their limited capacity or lack⁠-⁠of permissions is also increasing.

The March 2015 consultation on defined benefit (DB) to defined contribution (DC) transfers and conversions or transfers of safeguarded benefits to flexible benefits, which followed on from the pension reforms announced in the budget last year, proposed new protective measures for members choosing to transfer their benefits.1 The changes were confirmed in finalised guidance issued in June 2015.

As of 6th April 2015, scheme members with safeguarded pension benefits of £30,000 or more in their scheme, wishing to transfer these benefits to access their benefits flexibly, must first get advice from an authorised adviser.

This means that in order to advise on all DB pension schemes and some DC pension schemes, advisers must be appropriately qualified and experienced, as well as holding the necessary pension transfer permissions with the Financial Conduct Authority.

However, Age Partnership are seeing many cases where advisers remain unaware that they need these permissions. They warn that this in turn may be putting some customers at risk of unexpected delays after the provider rejects their transfer.

If a client is given advice by an adviser without the correct permissions, the ceding scheme should stop the transaction, causing serious delays for the client, as well as lost business for the adviser. This is a growing problem, with more customers with DB pensions currently seeking the same type of freedoms offered to their DC counterparts.

Adding to this issue is the growing prevalence of IFAs being approached by clients with cases that don't meet their minimum case threshold. There is a glut of demand for this kind of financial advice and not enough qualified advisers who want the business. Age Partnership are seeing an increase in referrals from advisers relating to all different pot sizes and types of pension scheme (not just DB or DC) looking to outsource because it is not high enough value for them – or simply because they are too busy to meet the demand.

Howard Hill, pension income expert at Age Partnership, comments:

"The pensions industry has seen a step change over the last twelve months with the introduction of the Pension Freedoms, but there are still a few crinkles to be ironed out in terms of the implementation. Advisers have been adjusting to the changes quickly and professionally, but there is still a knowledge gap about the subtleties of advising on DB to DC transfers and conversions. Some advisers simply don't realise that they need FCA pension transfer permissions – which they may not have – to take on all clients."

“Not only this, some advisers are being forced to turn down clients with smaller pots who don't meet their minimum case threshold. For independent advisers in particular, it simply doesn't make business sense to take on all cases, especially in the current environment of plentiful demand.

At Age Partnership, we offer a referral service to help alleviate some of the pressure of demand on busy advisers. This means that if an IFA/Advisor can't help a customer – due to either capacity or permissions problems – we can set up a relationship in which they can refer the client to us and we will pay them a percentage of the revenue achieved. Any advisers who are interested to find out more about this service should get in touch with us directly, and we will be happy to give them more information.”