Registered Pension Switch Issues

1
Registered Pension Switch Issues Guidance

• This training is aimed at advisers who are
  recommending the movement of funds from
  PP/SIPP/Stakeholder to PP/SIPP/Stakeholder.
• It DOES NOT cover any transfer from occupational
  schemes (e.g.EPP/SSAS/CIMP/COMP) or Final
  Salary/Defined Benefit. Transfers from Section 32
  buyout or non-profit bulk buy-outs are also
  classed as occupational scheme transfers in this
  context

2
Registered Pension Switch Issues Guidance

• Triggers for Switching
• There can be many reasons why the switching of an
  existing PPP is being considered these should
  be shown clearly in the Suitability Letter on
  the Factfind. The driving factors MUST be
  clearly identified, quantified and recorded
  before the suitability report is constructed

3
Triggers for Switching

• Fund performance (evidence that the funds of the
  existing provider were considered first)
• Fund selection (ditto as above)
• Restricted Fund selection to Risk Profile
  mismatch
• High charges
• Small value and consolidation with other funds
  for discount on charges
• Pre retirement positioning
• Poor service levels
• Policyholder fallen out with Provider
• The drivers for the recommended transfer MUST be
  clearly identified based on the clients real
  needs. Not based on a pre-determined course
  devised by the adviser.

4
Research on existing PPP

• Data to be collected and summarised in SL
• Current Fund Value if no Fund Value offered,
  likely to be a With Profit Deferred Annuity or
  Pure Endowment contract see below.
• Transfer Value - Any penalty should be shown in
  SL as xxxx and percentage of the current full
  fund.

• With Profits needs DETAILED comment on the
  history of the fund, current annual and terminal
  bonuses, MVA and an annualised historical
  achieved yield (should be available in the w/p
  guide of the provider). Also asset allocation of
  the fund and the guaranteed growth inherent in
  any guaranteed sum assured plus bonuses already
  paid.

5
Research on existing PPP

• Data to be collected and summarised in SL
• Projected Value at NRD
• Reduction in Yield - if available from old data
• Funds used and other funds available fund
  switching costs
• Charge structure
• Death benefits (return of fund or return of
  contributions etc)

• Additional benefits waiver if contribution
  ongoing
• Any guarantee these do appear as Guaranteed
  Annuity Rates (including the basis on which these
  are provided such as NRD, spouses benefit,
  escalation, etc.), Guaranteed Growth Rates,
  Guaranteed Fund Values at NRD, and Guaranteed
  Annuity at NRD.

6
Suitability Letter

• This is best issued to client pre-sale rather
  than post sale to allow fully informed
  investment decision to be made. This will cover
  usual main areas of any SL in terms of Advice
  Process (ToB, IDD, Purpose of SL, Current
  Situation, Risk Profile etc)
• Relevant areas from above then appear if No
  Guarantees then state this is SL.
• Options open to client need covering do
  nothing, amend existing plan, move to any other
  pension plan held, move to new plan, along with a
  full side by side comparison of charges,
  available funds, RIY etc. If the new plan is
  more expensive then a full justification will be
  required before the case can proceed. 
• If independent research engines are used (Aequos,
  etc.) then these must not be manipulated in
  favour of a specific provider.
• New provider is introduced with initial fund
  proposals with comments why selected on both.
  Match latter to Risk Profile. Match NRD to
  clients Selected Retirement Age.

7
Comparison of charges

• These can be tabular or simply compare projected
  values at common growth rate to common age. Care
  should be taken that illustration used for new
  plan is based on funds selected as AMC will
  affect figures. Highest projection shows best
  costs. Care some providers show Protected Rights
  fund to age 65 unless requested otherwise.

• Transferring to a plan with higher charges may be
  suitable for a client seeking potential for
  better growth via wider fund selection.
• However, ALL cases must include a comparison to
  stakeholder and reasons why. This route is not
  suitable if an ordinary PP is recommended
  (Regulatory Update 64).

8
Suitability Letter

• Illustration and KFD
• Reference to enclosure and commission disclosure.
• Warnings
• Standard warnings for Pension and investment
  funds (future values not guaranteed etc) plus
  out of the market during transfer warning as
  for ISA transfers. Also comment that these cases
  can take considerable time for the funds to be
  finalised and passed over.

9
Suitability Letter

• Conclusion
• Added value to client needs to be demonstrated
  from proposed transfer based on aims/risk
  profile/recommendations made.
• Requirement for ongoing annual reviews to
  re-balance fund selections etc. must be
  discussed. If a portfolio approach is used based
  on asset classes then this is particularly
  important.
• IF IN DOUBT ASK THE NETWORK PENSIONS
• TEAM!!!