To try and prevent further mis-selling in the financial services industry, the Financial Services Authority (FSA) has set guidelines on protected rights transfer advice. From the 1st October individuals will be able to move such pensions monies into Sipps (self invested personal pensions), to take investment decisions themselves to help boost their potential pension fund for that all important pension annuity purchase at retirement. It wants to ensure advice on transferring protected rights into Sipps is in line with guidance on non-Sipp personal pensions, including providing a key facts illustration with a comparison of projected retirement incomes.
From the 1st October (tomorrow), people will be able to contract out of the State Second Pension (S2P) into a Sipp and transfer existing National Insurance rebates (protected rights), from a personal pension into a Sipp.
Firms advising on contracting out into a Sipp have to provide a comparison of projected income from the Sipp versus potential benefits from S2P. The requirement already exists in relation to non-Sipp personal pensions.
In addition the added investment flexibility needs to be judged against the client’s needs and risk appetite. A clear explanation of the costs involved is also necessary.
Advisers always need to ensure they make suitable recommendations based on what is best for their customers – including, from 1 October, when these transfers are made into a Sipp.