Grove founder, Michael Ormond, was amongst a number of leading industry voices who were asked in a recent interview by Adviser Today – “what were the most frequently asked questions arising from pension transfer enquiries?”
His choice on the matter was “Why is it so important to fully complete the fact find before submitting the case to Grove?” and his answer below makes for compelling reasoning.

Completing some sort of questionnaire, where everything is kept in the same place and can be easily accessible, is the most obvious way any financial adviser can demonstrate to the FCA that they know their customer. For most of us this would mean completing some sort of fact find.

With a specialist area such as pension transfers, it makes sense to have a specialist fact find. You don’t really want to interrogate your clients about how they feel about the difference between a repayment mortgage over an interest only mortgage if it has no bearing.

You will obviously want to complete these fact finds with your clients, even if you are using a transfer bureau service. However, there are some things you need to know that might not seem obvious at first.

Why do you need to know the spouse’s pension details?

If, for example, it’s the husband’s pension being considered to transfer, the relevance of needing his wife/partners pension details is so you can build up a picture of what they could expect in retirement. If she has a big DB scheme, it might mean his is less significant in terms of overall household retirement income and therefore less risky to transfer, conversely, if his is the only retirement income then it puts a transfer at greater risk.

Another example could be he is looking to release cash early by transferring his DB scheme, then using that money to pay off debts, but what if his wife has an old personal pension, which might be more suitable to release because there aren’t any guarantees that would be lost. I’m not saying she would have to use hers instead of his, but I am saying you should ask the question, even if the answer is no! It will demonstrate to the FCA you are exploring all avenues and not just paying lip service to the advice process.

Income and expenditure

It’s important to detail the breakdown, especially with expenditure. Just writing total income in per month £3,400 and total out £3,400, just makes the FCA think you can’t be bothered to do a proper job.

By breaking down what gets spent on utilities, travel, holidays, debt repayment etc, really shows you are trying to know your customer. This level of detail also helps to establish what they might need as a minimum income in retirement, because you can work out if their debts will be cleared or mortgage paid off, or even their expensive holidays could be cut out if need be.

Details about their debts is especially important if your objective is to transfer and release some cash to clear or reduce their debts.

Objectives

This might seem like an odd part of a fact find that needs more detail; your client wants to transfer their old DB pension for flexibility and death benefits, it’s obvious, isn’t it?

Or they want to transfer it to release the maximum tax-free cash sum, simple.

The FCA are going to ask why?

Why do you want the maximum tax-free cash sum, what are they going to do with it?

Maybe it’s to pay off debts, in which case, say so. However, you will need to know what different debts they have? A credit card is likely to attract a higher interest rate than a bank loan so that should be cleared first, on the other hand could they transfer that debt into an interest free credit card and maybe solve their problem that way rather than cash in a very good DB scheme. Of course, they might not want to do that, but if not, why not?

Likewise, if it’s flexibility they want, then why? For the FCA it isn’t obvious, you need to spell it out for them. Maybe it’s to stagger retirement, or they’re changing jobs to a lower paid one and need to supplement their income, or travelling the world for 6 months before coming back to start their own part time business, who knows, but there will be a reason, so state it.

The bottom line

So, the bottom line here is this, the FCA want to see detail, they want to know why something is wanted, they want to make sure all the options available are explored and they want to make sure it can be demonstrated the advice being given is professional and thorough.

After the debacle that happened with British Steel, pension transfers are under the spotlight, so it’s up to us all to help prove the profession we are in is one which can demonstrate we operate at the very highest standard possible.