In October 2020 the FCA made changes around ‘abridged’ advice in relation to defined benefit pension transfers.

WARNING: This is chunky so I’ve split it into a number of posts! It’s not financial advice (but is commentary and opinion).

However, due to the highly suspicious times we find ourselves in – if you think it is (in anyway financial advice) please contact me in the first instance and explain why.

The driving force of the change to FCA guidance was simplifying the pension transfer process and filtering out, early on, whether there may be merits to proceeding to full pension transfer/conversion advice, which comes with a hefty price tag.


Consumer Outcome:

Stop fleecing, causing pain, anguish and hardship before there’s a full opportunity to do so.

The section of FCA guidance (nestled under COBS 19.1a) applies to advice provided to a retail client in relation to a pension conversion (z1) or pension transfer (z2).

If you’re wondering what the z1 and z2 mean it’s just that I give the definitions for these at the end.

If the only safeguarded benefits are ‘Guaranteed Annuity Rates’ (GARS z3) then abridged advice cannot be offered.

When providing abridged advice there are two outcomes a firm can provide.

The first outcome is that a personal recommendation is made to remain in an existing defined benefit pension.

This outcome can be provided without the need of performing a detailed analysis which would include the ‘appropropriate pension transfer analysis z4‘ report and associated transfer value comparator (TVC).

The second outcome is a little more tricky and a ‘firm’ must satisfy the following 3 conditions:

1. Inform the client they’re unable to take a view on whether it’s in the client’s best interest to transfer or convert without undertaking a full pension transfer or conversion advice. This still applies even if a firm considers it MAY be in a client’s best interests. 

2.The firm must check if the client wants full pension transfer or conversion advice and also check that the client understands the associated costs involved. 

3.If there’s any evidence that the client may be suffering from serious ill health or experiencing serious financial difficulty the firm must make the client aware of the implications for the level of advisor charges if they decide to proceed with full pension transfer or conversion advice.

What happens if a client wants to proceed to having full pension transfer or conversion advice?

You’re desperate to know but you will have to wait but it includes:

The role of the pension transfer specialist, death considerations and of course planned pregnancies.

Also in this series:

Risk of Death

The Role of the Pension Transfer Specialist

Planning for the Unplanned

 z1 Pension Conversion

a transaction resulting from a decision of a retail client to require the trustees or managers of a pension scheme to:

      1. (a) convert safeguarded benefits into different benefits that are flexible benefits under that pension scheme; or
      1. (b) pay an uncrystallised funds pension lump sum in respect of any of the safeguarded benefits.

z2 Pension Transfer

A transaction, resulting from the decision of a retail client who is an individual, to require a transfer payment in respect of any safeguarded benefits:

(a) from any pension scheme with a view to obtaining a right or entitlement to flexible benefits under another pension scheme; or

(b) from an occupational pension scheme with a view to obtaining a right or entitlement to safeguarded benefits under a non-occupational pension scheme; or

(c) from an individual pension contract providing fixed or guaranteed benefits that replaced similar safeguarded benefits under a pension scheme with a view to obtaining a right or entitlement to safeguarded benefits under a non-occupational pension scheme or under a defined contribution occupational pension scheme.

For the purposes of this definition of “pension transfer”:

(d) “pension scheme” means an occupational pension scheme or a non-occupational pension scheme; and

(e) “non-occupational pension scheme” means a stakeholder pension scheme, a personal pension scheme or a deferred annuity contract.

Source: FCA

z3 Guaranteed Annuity Rates

An arrangement in a pension scheme to provide benefits whereby, in defined circumstances and irrespective of the prevailing market rate for annuities when those benefits come into payment, a member is entitled to:

(a) an annuity at a minimum specified rate; or

(b) benefits equivalent to that annuity at that minimum specified rate, including a minimum guaranteed income under a retirement annuity but excluding, for the avoidance of doubt:

(i) fixed or guaranteed benefits in an individual pension contract that replaced similar safeguarded benefits under a defined benefits pension scheme;

(ii) an entitlement to a lifetime income paying a guaranteed minimum pension that results from contracting out of the State Earnings Related Pension Scheme; and

(iii) a defined benefit minimum that accrues or may accrue at the same time as money-purchase benefits under a pension arrangement.

    z4 Appropriate Pension Transfer Analysis (APTA)


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