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Pension Transfers:

Since the late 1980’s, Pensions have continuously been transferred from one product (or provider) to another. These transactions have often resulted in the Financial Services industry being well remunerated, however the transfers were not necessarily the best course of action for the pension holder to take.

Here are the main examples:

  • Self Invested Personal Pension (SIPP): Often set up to hold high risk, illiquid, underperforming alternative investments, with higher charging structures.
  • Small Self Administered Scheme (SASS): Used in the same way as SIPP’s, and often set up in a contrived fashion to hold the same type of products.
  • Final Salary transfer: With in-built guarantees it is rarely suitable to transfer this type of pension to any other form of Pension product or provider.
  • Free Standing Additional Voluntary Contribution (FSAVC): In the vast majority of cases ‘in-house’ AVC’s have proven to be far more suitable.
  • Qualifying Recognised Overseas Pension Scheme (QROPS): Although designed for people from the UK intending to retire overseas, many were sold on the promise of cash payment upon transfer, leading to substantial tax charges (up to 55%) and therefore poor advice.

 

Investment sales and transfers:

With concerns over the suitability of advice, major financial institutions have been ordered to review their previous sales.

Here are the main examples:

  • Investment Bonds: The product often does not match an Investor’s attitude to risk.
  • With Profit Bond: The same applies to that of Investment Bonds, however often exacerbated by substantial exit charges and/or market value reductions (MVR’s)
  • Unit Trusts: The product often does not match an Investors attitude to risk.
  • Individual Savings Accounts (ISAs): Despite the obvious tax benefits of utilising an ISA for investment planning purposes, there are numerous cases where other products have been sold, without utilising the ISA allowance.

 

In addition, numerous cases can be deemed unsuitable due to the amount invested, in relation to an Investor’s overall liquid capital. This can result in an Investor not having sufficient capacity for loss, to warrant the overall investment.

Other examples:

  • Payment Protection Insurance (PPI)
  • Packaged Bank Accounts

 

Products under Review:

Endowments, Mortgages, Debt Management Plans, Closed book products (where fees have not been disclosed accurately).

Despite poor advice being all too common, annual management charges continue to be extracted from individual pension and investment funds.