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The FCA has warned of elevated danger to customers when abroad corporations refer outlined profit (DB) scheme members to UK corporations for pension switch recommendation.
The regulator has reminded regulated advisers that the Shopper Obligation guidelines – resulting from start in July – should apply to recommendation to those transfers.
The FCA stated that it was “involved” about abroad corporations concentrating on the UK pension advantages of outlined profit (DB) scheme members who’re residing abroad.
In a regulatory discover this week, it stated UK corporations participating with abroad corporations – or providing recommendation to scheme members based mostly outdoors the UK – should abide by their regulatory tasks.
These embrace Shopper Obligation, it says, and significantly the accountability to proactively ship “good outcomes” for retail prospects and to keep away from inflicting foreseeable hurt to retail prospects.
The FCA has issued the warning as a result of prevalence of the “abroad recommendation mannequin.”
On this mannequin a member based mostly abroad, equivalent to an expat employee, is approached by an abroad agency about transferring their UK Outlined Profit (DB) pension advantages into another pension association. The FCA says that is typically an abroad pension association or a UK-based worldwide self-invested private pension (SIPP) holding offshore investments.
It reminded advisers that the place the scheme member has a money equal switch worth (CETV) over £30,000, they need to obtain ‘applicable impartial recommendation’ from an FCA-authorised agency earlier than scheme trustees can switch pension advantages to an outlined contribution (DC) scheme. This requirement applies whether or not the member is predicated within the UK or abroad.
Members with a CETV under £30,000 can also select to obtain switch recommendation or organize transfers with out recommendation.
The FCA stated that in some instances the abroad agency introduces the scheme member to a UK recommendation agency solely for recommendation on transferring their DB pension funds.
The abroad agency will normally advise on or undertake the proposed association for the transferred funds. As soon as it’s confirmed that the member has acquired ‘applicable impartial recommendation’ on the switch from the UK agency and on the member’s request, the abroad agency contacts the UK DB scheme trustees to rearrange the switch of the member’s pension advantages into the choice pension association and offshore funding.
DB scheme trustees should evaluation the applying to switch, the FCA stated, they usually have separate duties which can be set out within the detailed steerage from the Pension Regulator (TPR) ‘Dealing with Transfer Requests’. In these instances the abroad corporations will not be FCA authorised however could also be regulated by an abroad regulator.
Related guidelines and steerage embrace SYSC 6, COBS 2, COBS 9, COBS 19, Ideas 2, 3, 6, 7 and 9 and the FCA’s Finalised Steerage 21/3 (FG 21/3).
From 31 July, the Shopper Obligation (Precept 12 and PRIN 2A) units greater and clearer requirements of client safety throughout monetary companies and requires corporations to place their prospects’ wants first.
• Supply URL: https://www.fca.org.uk/firms/accepting-pension-transfer-referrals-overseas-advisers-uk-authorised-firms-responsibilities
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