Transfer advice transition period

We have referred to the transitional rules in recent articles. We thought it might be useful to set these out in full in the table below.

Aspect

Requirements to qualify for transitional treatment

One-page summary

Not applicable, the one-page summary is required in all suitability reports from 1 October 2020 although certain elements relating to workplace pension may be omitted – see below.

Contingent charging

Firms may charge contingently where they can demonstrate that:

  • the advice process before 1 October; and
  • contingent charging terms were agreed in writing before 1 October; and
  • a personal recommendation/suitability report is prepared before 1 January 2021.

Consideration of workplace pension scheme (WPS)

Firms may:

  1. omit the comparison with a WPS in APTA; and
  2. the one-page summary can omit the comparison with a WPS …

… where they can demonstrate that:

  • the advice process before 1 October; and
  • a personal recommendation/suitability report is prepared before 1 January 2021

Cash flow modelling*

Firms need not carry out cashflow modelling as set out in the new rules where they can demonstrate that:

  • the advice process before 1 October; and
  • a personal recommendation/suitability report is prepared before 1 January 2021

* The new rules on cash flow modelling
The rules shown below are applicable from 1 October 2020 unless the transitional conditions listed above apply.

Where a firm prepares a cashflow model, it must:

  • produce the model in real terms in line with the CPI inflation rate;
  • (if the net income is being modelled) ensure that the tax bands and tax limits applied are based on reasonable assumptions;
  • take into account all relevant tax charges that may apply in both the ceding arrangement and the proposed arrangement; and
  • include stress-testing scenarios to enable the retail client to assess more than one potential outcome.

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.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

January will soon enough be on us and render these transitional rules obsolete. However, it would be very easy for pipeline cases to be non-compliant unless firms note the requirements carefully.

For example, we have seen cases where the process started before 1 October but the client fee agreement was not signed until after 1 October. This fails the tests for charging on a contingent basis and so those clients will now have to be charged on a non-contingent basis.

Action Required By You

  • ATEB has lots of experience of working with firms and the FCA around pension transfer advice;
  • Contact ATEB if you would like to have guidance on implementing a robust transfer advice process;
  • We are running a series of three webinars on the new rules, starting late October. Please email us here to express an interest in joining the webinars. (If the link above isn’t supported on your device please simply email your interest to webinars@atebconsulting.co.uk).

About the Author

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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