Final Salary Scheme

Final Salary Transfers to QROPS Changes 2015


DB to DC Transfers Require UK FCA Regulated Adviser

Final salary transfers to QROPS will likely take longer from April 2015, requiring a UK FCA regulated adviser to sign off on the pension transfers.

Contributions from Defined Benefit (DB) final salary pension schemes to Defined Contribution (DC) money purchase pension schemes will now require a UK FCA regulated adviser sign-off from April 6th, 2015. Transfers from UK defined contribution schemes remain unaffected by these changes.

i.e. a pension from Prudential & Aviva would not require UK FCA regulated adviser to transfer out to a QROPS.

The UK Pensions Regulator (TPR) issued a consultation paper “DB to DC transfers and conversions” which was written to give Trustees of Final Salary Schemes guidance on the new transfer process.

The new regulations mean that transfers will now likely take longer.
Here is the HMRC consultation paper concerning DB to DC transfers.

Key Changes

  • Confirmation that any transfer over £30,000 will require the Member to have received appropriate Independent Financial Advice from a UK FCA regulated adviser
  • Guidance will be given to DB pension scheme trustees on reducing a member’s transfer value and how to apply for more time to carry out a transfer, i.e. delays will be inevitable when transferring from a final salary scheme to a QROPS

There are a number of areas that have been clarified in terms of how the pension transfer process will work, namely:

  • The Trustees’ role is specifically not to ‘second-guess the member’s individual circumstances’, nor to ‘prevent a member making decisions which the Trustees might consider inappropriate’;
  • The Trustees are not required to check the advice, ask what the initial recommendation was, or whether the Member is following that recommendation’;
  • The Trustees are not required to obtain a copy of the advice.

Time Delay of Transfers to a QROPS

  • Members with safeguarded benefits have a statutory right to a request a transfer once in every 12 month period. Schemes may allow more frequent requests.
  • The trustees must respond with a statement of entitlement within three months of the date of the member’s application
  • Trustees can submit a request to HMRC to extend the six month payment period during which they must make payment of a transfer
  • For a transfer to proceed, the UK pension trustees require written confirmation from the adviser that advice has been given and that the adviser is regulated to give this advice, as well as their FCA registration number.

Conclusion

The new QROPS regulations require a UK FCA regulated adviser to sign off on final salary pension transfers. It could also take up to 6 months for that transfer to take place. Pensions already ‘in payment’ can be transferred, but is still under the discretion of the pension trustees.

Final Salary Transfers to QROPS Changes 2015 by

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