Pension transfers - scheme information

Attempts are being made to standardise the provision of information

May 2021

Alistair MacDougall

Technical Manager, ATEB Compliance

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Risk Disclaimer

The information, opinions, estimates or forecasts contained in this article were obtained from ATEB Compliance, are reasonably believed to be reliable and are subject to change at any time. It has been produced for information only.

Views and opinions are those of the author and do not necessarily reflect those of BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned. No action must be taken or refrained from being taken based on this content alone.

Key takeaways:

  • Understand the background to the introduction of templates to standardise the process of requesting data from DB scheme trustees
  • Describe the need for using templates to obtain data from Workplace Pension Schemes as part of the transfer advice process

Pension transfers – scheme information

Firms that provide advice on defined benefit pension transfers will be aware that it is not always straightforward to obtain details regarding the scheme and the member’s benefits. Firms may send a list of detailed questions only to receive a standard reply stating that the scheme does not respond to questionnaires and instead listing what the scheme believes is the necessary information.

While this is doubtless frustrating from the firm’s point of view, it is understandable from the scheme’s perspective as responding to detailed questions presented in as many different ways as there are firms sending them clearly requires a degree of manual input that is likely to be disproportionately time-consuming and labour intensive. The Pensions Regulator (TPR) is known to have told the FCA that scheme administrators were sometimes frustrated by requests for excessively detailed information.

The process was clearly a candidate for efficiency gains to be made through greater standardisation. The surprise, perhaps, is that it didn’t come sooner!

From there, with the rapid and significant increase in demand from advisers in the wake of ‘pension freedoms’ created in the Pensions Act 2015, the wider issue was recognised in the occupational scheme world and it was an obvious next step for attempts to be made to standardise data that should be provided across all schemes.

As a result of this realisation, TPR and the FCA worked with The Pensions Administration Standards Association (PASA), assisted by the Personal Finance Society and the Personal Investment Management and Financial Advice Association, to develop and roll out a scheme template, a member template and guidance on their websites in July 2019.

These organisations have encouraged both members and non-members to use it on a best practice basis.

 

FCA Template

The FCA has now consulted (GC20/01) on a form of the template, slightly different to PASA’s version. Given their involvement in the relatively recent TPR version, it seems unfortunate that the proposed FCA version is different. However, the FCA justifies this by stating that its version focuses on the information that the FCA thinks advisers need to have to give advice, rather than the way scheme administrators should provide the information. A copy of the proposed scheme data template is contained in Annex 1 of GC20/01.

The FCA has discussed the template with PASA and TPR and it has been agreed that advisers should still accept the scheme data information if it is provided on the PASA template, or in any other form.

In any case, the FCA expects that the data in either form should enable advisers to carry out the necessary comparisons and analysis required under the rules and guidance relating to advice on pension transfers.

 

Exceptions

The template is intended to cover most of the benefits found in schemes, but it is inevitable that some schemes will have non-standard benefits that may need further clarification. So there could still have to be follow up contact between firms and schemes but the whole process should be more efficient for all parties.

 

Workplace schemes (WPS)

Since 1 October 2020, it is a requirement that any recommendation to transfer should consider an available workplace scheme as the preferred destination for transferred funds unless an alternative personal plan can clearly be shown to be MORE suitable.

As a WPS is by definition a defined contribution scheme, the scheme data template(s) described above are not appropriate as a means of requesting WPS data. That presents an opportunity for a WPS data request template to be created.

Risk Disclaimer

The information, opinions, estimates or forecasts contained in this article were obtained from ATEB Compliance, are reasonably believed to be reliable and are subject to change at any time. It has been produced for information only.

Views and opinions are those of the author and do not necessarily reflect those of BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned. No action must be taken or refrained from being taken based on this content alone.

Our view

It is a truism in business management that standardising processes where appropriate and possible is likely to improve consistency and efficiency. To that extent, the availability of a standard scheme data template (even if there are two options) should be embraced by firms.

Expertise will still be required to know when the nuances of a particular scheme or member might need specific questions to be asked, either initially or as a follow up to the scheme’s response.

The consultation on the template and all other topics covered in GC 20/01 closed on 4 September 2020 and final guidance was expected in the first quarter of 2021. It is possible that the template will be tweaked following the consultation feedback but past experience suggests that any tweaks will be minor so the template in GC20/01 is a good place for firms to start.

It is important to note that the scheme data template will NOT form part of the Finalised Guidance, but should be considered as good practice.

Action required by you

  • Firms should read and understand the thrust of GC20/01;
  • Firms should consider using the template when requesting scheme data;
  • Firms should consider creating a standard data request for WPS;
  • ATEB has vast experience in helping firms to create a robust transfer advice process or provide a file review service for many firms. Firms should contact ATEB if they would appreciate guidance or assistance

 

ATEB Compliance is a trading name of ATEB Business Solutions Limited Registered in England & Wales Reg. No: 5075208. Registered office: Evolve Business Centre, Cygnet Way, Houghton-le-Spring, County Durham, DH4 5QY

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