Another Pension Transfer Charging Quirk

Policy Statement PS20-06 states:

“A firm may set a different level of non-contingent charges if they are not undertaking the full range of advising and related services that are normally provided alongside DB transfer advice. For example, if a firm is not advising on the proposed destination for the funds, it could offer lower charges for the transfer advice to self-investors or on an overseas transfer. In each case, the firm must still charge the same whether or not the advice is to transfer.”

That is all very clear. However, that paragraph had a final sentence tacked on, namely:

“It may also not charge less than it would charge for investment advice of the same value …”

This is also clear in isolatiion and is confirmed in COBS 19.1B.7 which states:

“A firm should not charge less in relation to full pension transfer or conversion advice (including charges for abridged advice) than it would do if it provided investment advice on the investment of the same size of pension funds but which did not include funds from a pension transfer or a pension conversion.”

However, in the event that a firm is only providing the transfer advice and not advising on the investment aspect / proposed destination for the funds, it would not be unreasonable to conclude that the “may also not charge less than it would charge for investment advice of the same value” does not apply. Not unreasonable – but wrong. The ‘may not charge less’ is a key element of the anti-gaming provisions.

The requirement in COBS 19.1.7BE(6) to not charge less than for investment advice on funds of equal value applies irrespective of whether or not a firm provides the investment advice in addition to the transfer advice. This means that where a firm is only providing transfer advice and is not advising on the proposed arrangement, as described in PS20/6, it may not charge less than it would charge for investment advice on the same value of funds.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Action Required By You

Review your transfer charging model against this rule.
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Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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