PENSION TRANSFERS: AN OVERVIEW
| Pages | 201-210 |
| Published date | 01 March 1994 |
| DOI | https://doi.org/10.1108/eb024807 |
| Date | 01 March 1994 |
| Author | SIMON MORRIS |
| Subject Matter | Accounting & finance |
PENSION TRANSFERS: AN OVERVIEW
Received: 12th April, 1994
SIMON
MORRIS
SIMON
MORRIS
IS A PARTNER WITH THE FIRM OF CAMERON
MARKBY HEWITT AND A MEMBER OK THE
EDITORIAL BOARD
OF JOURNAL
OF F1NANCIAL
REGULATION
AND COMPLIANCE.
ABSTRACT
The
issue
of pension
transfers,
which has
leapt into
prominence
in recent months,
raises complex
and novel
issues,
albeit in
relation to
alleged breaches
of
long
estab-
lished
rules.
A pilot study of one
aspect
of
pension transfer sales commissioned by
Securities
&
Investments
Board
(SIB)
has
identified significant concerns over the
quality of advice given, which in turn
raises the possibility that a number of
investors may have been disadvantaged,
although this cannot be
determined
from
study of the files alone. The apparently
widescale
breaches,
and the potential
mag-
nitude of compensation that may be
required,
are
a
major
concern for
a number
of product companies and Independent
Financial
Advisers (IFAs)
and this situa-
tion is
being monitored by the Department
of
Trade
and
Industry
(DTI).
This paper
aims
to
provide
an
overview
of the
issues
and
to suggest some steps
that
affected firms
may consider
taking.
THE TRANSACTIONS
The transactions on which the SIB
pilot study focused are where a per-
sonal pension product has been sold
to a person who is or was a member
of an occupational pension scheme
(OPS).
Where the sale is made to a
self-employed person the issues
which are concerning SIB do not
arise to the same extent.
A pension transfer is the name
given to the sale of a personal pen-
sion product to an investor, paid for
by the transfer of a preserved benefit
under an OPS after the investor has
left the scheme or has left employ-
ment. Pension transfers were first
written in January 1989 with
1991-92 being the peak years. It is
estimated that some 300,000 inves-
tors transferred £5.5bn worth of
benefits into personal pension
schemes.
A pension opt-out is a transaction
where an investor chooses not to
join an OPS, or ceases to be a contri-
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