New Changes to UK Pension Rules
A recent report by the UK Financial Conduct Authority (FCA) found that 47% of advice on defined benefit to defined contribution pension schemes was 'unsuitable’. Following this, the FCA has introduced new rules and guidelines for pension transfer specialists and consultants.
It is notable that these changes are largely in response to UK residents taking advantage the flexible access rules introduced for UK pension schemes in April 2015. Transfer values have been at record highs since 2016 resulting in £20bn - £30bn per annum moving out of defined benefit schemes each year. As a consequence, the FCA has introduce new rules and guidelines which have also impacted on QROPS transfer advice.
These new guidelines include a package of changes:
- working with other advisors
- assessing the client’s attitude to risk,
- rules requiring the firms to provide suitable reporting, even when a transfer is not recommended
these changes look to amend the assumptions for valuing limited inflationary pension increases with a defined benefit scheme.
The FCA see two distinct area of advice for pension transfers.
1. financial advisor advising on the suitability of the new scheme and its investments
2. a pension transfer specialist advising on the suitability of the transfer itself.
The FCA is requiring that “advice must take account of the proposed destination of the transfer funds if the transfer proceeds” with both advisors working together.
For those thinking about transferring out of your UK defined benefit pension, what this could mean now is that your advisors (from both the scheme you are transferring out of and in to), must work together to ensure you are sufficiently aware of the advantages and disadvantages of transferring, the nature of the investments, and receive the most suitable advice.
Another consequence of the FCA rule change, specifically for those living and New Zealand looking to transfer their UK pension to New Zealand is how the NZ regulator, the FMA, will react to offshore advisors providing advice to NZ residents on the suitability of an investment into a NZ registered fund. NZ regulations require that to give advice to a NZ resident on investing you need to be a NZ registered advisor. With this recent announcement by the FCA, it is unclear if they have thought through how UK pension transfers specialist will interact and give advice to non-resident clients and how the NZ regulators will react to overseas advisor giving advice to New Zealand residents.
Since the inception of QROPS pension transfers we have seen increasing regulation put in place by the FCA which make the transfer process a more complex and time-consuming process. These recent changes have added another level of complexity. Post Brexit when the EU requirement to provide the ability to transfer pensions no longer applies to the UK we may see more restrictions put in place by the FCA.
If you are a New Zealand resident and have been considering transferring you UK pension to New Zealand, these new regulations could impact your pension transfer to an NZ scheme. To start your pension transfer, get in touch with us by filling in this enquiry form.
Ranfurly Strategic offer a listed Superannuation Scheme, as well as an agent that can assist you through the transfer process, prepare transfer forms, and assist in obtaining the required UK and NZ advice that you need. The Ranfurly Scheme is listed on the UK Government Recognised Pension Schemes List.