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Pension row rumbles on as IFAs back s32s

Research into IFAs’ preferred transfer strategies has reignited a row between Scottish Equitable and Standard Life.

The ScotEq survey found that 88 per cent of IFAs favour moving to section 32 contracts to preserve clients’ tax-free cash in the run up to A-Day.

The findings back claims by ScotEq pensions development director Stewart Ritchie that s32s are the best way for many clients to preserve tax-free cash in excess of 25 per cent.

But ScotEq’s research also found that only 6 per cent of advisers will use block transfers into s32a contracts. This concerns Standard Life marketing technical manager John Lawson, who is a strong proponent of this type of transfer.

Block transfers allow two or more individuals who switch contracts at the same time to retain tax-free cash over 25 per cent, even if they later transfer into another pension arrangement after A-Day.

Ritchie says block transfers, particularly where the insurer matches oneman schemes with a similar individual or “buddy”, are perceived as risky because one of the partners can renege and leave the other in limbo.

Lawson insists that block transfers are preferable to s32s although harder to sell. He says Standard Life has 200,000 clients in its pool of buddies.

Ritchie says: “Where you are relying on a partner for block transfers, history tells us that partners can split up and you need to check whether the buddy can really be relied on.”

Lawson says: “It is easy to persuade IFAs to use s32s and block transfers are far preferable but more difficult to sell. We hear sales consultants from a couple of life offices are saying the Revenue will kill off block transfers but it is absolute nonsense.”

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