Giving Up Your DB Permissions
Maybe the time has come for you to give up your DB permissions and it may leave you wondering, where does this leave me? What can and can’t I advise on?
It all depends on what permissions you have and there are three options for this:
- Full permissions – pension transfers, pension conversions and pension opt-outs.
- Limited permissions – transfers from GARs, including retirement annuity contracts and DC occupational schemes without safeguarded benefits only.
When giving up your permissions, you can ask for them to be limited or have them completely removed. It’s important that you understand what these permissions mean as to what you can and can’t advise on moving forward.
One of the main reasons for this is due to PI cover. You must understand what permissions you have to know what capital adequacy you need in place and that no limitations are included on your PI.
Understanding what a safeguarded benefit is
Understanding what is a safeguarded benefit, and what isn’t, can be tricky and it certainly isn’t straight forward. There are benefits which don’t class as being safeguarded and there are some that do. Then there are others where they might be (confusing, right?!). For example:
Benefits that are safeguarded benefits:
- Guaranteed Minimum Pension (GMP).
- Section 9(2B) Rights.
- Pension Review Top-up Plans.
- Guaranteed Annuity Rates (GARs)*.
Benefits that are not safeguarded benefits:
- Guaranteed lump sums.
- Guaranteed investment returns during the accumulation phase.
- Scheme specific protected tax-free lump sums.
- Guarantees held under a separate insurance policy (third-party promise).
What may be a safeguarded benefit depending on the terms of the policy:
- Additional Voluntary Contributions (AVCs).
- Buy-out polices (including S32 policies).
- Retirement Annuity Contracts.
- Income guarantees on drawdown.
- Hybrid policies.
*Although GARs are classed as a safeguarded benefit, the FCA does not require PTS sign off for this advice and therefore can be advised on under the limited level of transfer permissions.
Why would it be straight forward?
Before proceeding with any advice, we would recommend ensuring that you know exactly what permissions you have, therefore knowing what you can and can’t advise on and what this means for your PI. If you are still unclear, you should contact the provider, they should be able to provide you with more information.