Changes to Defined Benefit advice charges
New charging structures for Final Salary Advice
Further to a recent consultation by the FCA, contingent charging has now been banned for Defined Benefit transfer advice. In lay-mans terms, this is where the adviser only takes a fee from a Final Salary transfer, once advice to transfer has been given and a product has been recommended. Ordinarily, the fee is then taken from the pension transfer proceeds.
What does this mean for you, the client?
The FCA believes that contingent charging (where a fee is taken only when a transfer is recommended), encouraged some advisers to recommend a transfer, despite it not being in the best interests of the client. This has been triggered by the wave of transfers that occurred in 2017/18 when the British Steele scheme was closed.
The move will help good and professional advisers, who often advise remaining in the scheme, but this involves a similar amount of work but the adviser was often not charging for this.
Clients will now have to pay a fee for the Defined Benefit suitability advice, regardless of if the recommendation is to transfer or not.
There will be two exceptions for
How it will work in practice?
Please refer to our ‘Triage document’ for information on how advice will be given:
Step 1. Triage – You will be given a document (see above), to read through and sign. This will be provided to you before any advice is given and after your first contact with the company. It will be sent to you via email or posted.
Due to time constraints on Defined Benefit transfers, if you are not already in possession of the transfer paperwork from your scheme, we will need to contact your existing scheme/s to get scheme-specific information. We will also need a state pension forecast.
Step 2 ‘Abridged Advice’ – If you wish to proceed with advice after reading the Triage document, you can then make an appointment to see our Occupational Transfer Specialist, Frances. This appointment will be up to an hour-long and is £450. During the appointment, Frances will assess your circumstances and go through the transfer paperwork, a Fact Find, an attitude to risk questionnaire, and an attitude to transfer risk questionnaire. You will have a discussion about your retirement objectives, and our adviser will provide you with guidance on whether a transfer is suitable or not. If she advises that it is not in your best interests to transfer the pension, a letter will be provided to you explaining the reasons why. At this point the £495 (plus VAT where applicable) is payable.
If there is evidence at this stage that a transfer MAY be in your interests, you can choose to proceed to the full advice stage
Step 3:- ‘Full Advice’ – Our adviser will inform you of the fees, and obtain your instruction to proceed with the recommendations. If the final advice is to transfer the pension, the £495 fee from step 2 can be taken deducted from the advice fee. Our Pension Transfer Specialist will perform an in-depth analysis of the scheme that will consider the trade-offs between your objectives and your needs. The starting point is that YOU SHOULD NOT TRANSFER.
Frances will perform Cash Flow analysis and examine how your choices may affect your future.
The next stop on the journey is to bring personal assessment, pension transfer analysis, and model together for consideration. Frances will then formulate her advice to either ‘NO nothing’ or ‘Transfer. The advice is then articulated into a personalised report that will be presented to you.
Fees will be settled at this point and, where appropriate, our team will oversee your transfer. Please note that if transfer advice is provided, fees can be deducted from the pension fund. where the advice is to stay put, you will be sent a bill for the agreed fee.