FT Adviser (16/08/2019) – Proposals from the Financial Conduct Authority (FCA) will put extra burden on advisers as they will have to explain in detail why they have advised their client to transfer their defined benefit pension to a Sipp rather than a workplace pension.
The rules, which form part of the FCA’s consultation on DB transfers published on July 30, will require firms to demonstrate why a self-invested personal pension (Sipp) is better suited for a pension transfer than a workplace scheme.
This is because the FCA believes that Sipps are not always the best choice for clients as they come with ongoing charges and complicated investment choices.
Alan Chan, director and independent financial adviser at IFS Wealth & Pensions, said the rules meant extra work for advisers.
Mr Chan said: “This doesn’t necessarily mean that advisers are forced to recommend a workplace pension scheme but they must clearly demonstrate that the bells and whistles of a personal pension or a Sipp better meet the client’s preferences to investing or achieve their objectives.
“A clear example is where a client wishes to take their tax-free cash immediately while leaving the remainder funds invested, ie, flexi-access drawdown.
“If the workplace pension scheme cannot facilitate this, then you would not use it and can discount this option immediately and begin to look at alternative schemes.”