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Govt to review pension transfer rules for ARs


The Government and FCA are to review rules that suggest appointed representatives are barred from working on transfers of safeguarded benefits.

In March the regulator announced it was introducing tighter standards on pension transfers, creating a new term – safeguarded benefits – to include transfers from defined benefit schemes and plans with guaranteed annuity rates.

The Treasury introduced a separate Regulated Activity of advising on conversion or transfer of pension benefits.

But it appears appointed representative regulations were not updated to allow ARs to perform the new activity.

The Treasury and FCA confirm they are in discussion around clearing up a possible “ambiguity”.

A Treasury spokeswoman says: “The Government is working closely with the FCA to understand whether there is the need for additional regulatory clarity for appointed representatives when advising on the conversion or transfer of safeguarded benefits”.

The FCA could not confirm how it would be treating ARs that perform pension transfer work in the meantime.

Compliance firm Waterside Gate Consulting principal consultant Jonathan Purle says: “If you want to trade as an AR there are only certain things you can do. For example in the past you haven’t been able to do discretionary investment management.

“Up until now ARs could give pension transfer advice. But now, there’s a new permission – advising on pension transfers and conversions. But that hasn’t been carried over to the appointed representative regulations – so strictly speaking ARs can’t do that activity.

“But it’s not an insurmountable problem. If advisers adjust their paperwork to say the advice is being given by the network, not by the AR, you can probably get around it.”

Purle adds that ARs could be at risk of claims “irrespective of the advice” following the precedent set by a 2007 case in which Scottish Equitable was judged to have given advice without the correct permissions.

Syndaxi Chartered Financial Planners managing director Robert Reid says: “It underlines the fact that where you’re introducing significant change secretly it’s inevitable you’ll get cock-ups like this. These kinds of problems are a byproduct of that strategy.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. I am assuming this is code for- yes we missed it and we are fixing it now. Can we just hurry up as this is obviously completely unintentional

  2. The current position is that ARs would need to become a trading style of the Network, which could inadvertently also give them DFM permissions. The FCA is also anti trading styles , so confirms yet again the unintended consequences of poorly drafted policy

  3. Charlie Palmer of IFAC picked this up a couple of weeks ago, Personal Touch and the FCA at the time commented to the effect he was incorrect ……………………..

  4. Not sure why Sam has given me such a protracted title 🙂
    @Jane – Yep, they missed it.
    @Gordon – that would only be the case if the network itself had those permissions. This is rare for IFA networks.
    @Gaynor, I was fairly incensed at the way Charlie/IFAC were dismissed on this point – a little analysis of the legislative regime suggested they were right. I think I was able to post to this effect within about an hour of Sam’s original article. Makes you wonder why the anonymous FCA spokeswoman chose instead to make rather menacing comments about IFAC rather than taking a proper look at it.

  5. All the reports these days of reviews describe them as being by the Treasury and the FCA. I rather suspect that the Treasury is now setting the agenda (because it doesn’t trust the FCA to do so) and the role of the FCA is merely to implement what the Treasury wants to see done.

    The Treasury’s clearly having none of the FCA’s traditional brush-off of: We were set up by an independent body so we can do what we like when we like how we like, so go away and leave us alone. Nowadays it’s: This is what you’re going to do and all we want to hear from you is how and how soon.

    Must be a terrible imposition for them, the poor souls.

  6. If the network has permissions to conduct pension transfer, as the Principal, then all of it agents – the appointed representative and the representatives within them – who are qualified as pension transfer Specialist, are providing advice and recommendation on behalf of the Principal (the network). The client agreement, for network’s AR, should clearly states that they are appointed representatives of the Principal and the documentation in respect of the initial advice fee should clearly state that the fee is payable to the Principal through the agent (AR), there is no issue if the personal recommendation includes a recommendation on the ‘safeguarded benefits’. The recommendation is the recommendation of the Principal, that is facilitated by the PTS. I can only assume that this is a slow news day.

    • That’s not correct Gordon. The ordinary relation between Principal and A/R is one of “sponsorship” giving rise to exemption, rather than agency – per HHJ Hodge in Goldstone & Another v Becque Wayman Investments Ltd & Ors [2012] EWHC 3549 (ch). The Principal’s permissions only carry through to the A/R’s exemption if they are specified in the Regs – per s.39(1), FSMA. The FSMA (Appointed Representative) Regulations 2001 SI 1217 have traditionally included “an activity of the kind specified by article 53 of that [Regulated Activities] Order (advising on investments)” [Reg.2(c)]. Hence how what you’re suggesting previously worked – all pension transfer advice was a subset of that activity.

      What has happened now is that the RAO has a new separate regulated activity of ‘Advising on conversion or transfer of pension benefits’ as Art.53E of the RAO. There has however been no matching amendment to the appointed representative regulations. As such, advice that falls into Art.53E rather than Art.53 cannot be undertaken by the A/R as such.

      To get around this, you need to get your A/Rs to amend the client agreement given to such clients to specify that the Network itself is a party (not merely that the A/R is an A/R of the Network) and the Network gives the advice falling in Art.53E. Likewise, the suitability report should also specify that the Network is giving the advice (irrespective of branding). This should suffice given that the adviser is approved as an adviser of the Network.

      You won’t however get around it simply by naming the A/R’s Principal in the Client Agreement (the Principal can only be Principal to the extent of s.39), or by virtue of the adviser’s advice being checked by a pension transfer specialist employed by the network.

      I hope that helps.

    • Actually, re-reading what you say beginning “the documentation in respect of…”, we’re saying a similar solution.

  7. Given that the Treasury is relieving the FCA of the fine monies, it seems a natural progression to go the whole way and devolve their powers, and save us all a lot of money.

  8. Here’s an interesting one then…as a Chartered Financial Planner (currently in a paraplannning role – we have only level 4 advisers who are regulated)….if I decided to move my Prudential DB scheme to a DC scheme…..would the FCA demand that I sought regulated advice as well??

  9. Jonathan – Many thanks for confirming our solution, that has been in place for a long time, actually achieves what it is intended to achieve. Further, each adviser within our network has an individual ‘representative’ agreement directly with the network; regardless of what contract they have with the appointed representative owner. The PTF advice is clearly given by the representative on behalf of the network which does have PTF permissions.

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