Restrictions on DC SIPP transfer

gm0

I have a compliance question on a SIPP ingesting a transfer from a low cost employer scheme DC fund.

The scenario is transfer (via cash) from a deferred employer DC scheme to a retail SIPP offering sensible drawdown such as from HL or Vanguard (when launched) or similar.
Source is a simple DC fund - no GAR's, no DB or anything fancy to trigger the compulsory advice rules. As the existing scheme does not offer drawdown operations just annuity open market etc. a transfer somewhere is needed before reaching PCLS/Drawdown commencement date.
There is currently no IFA in the picture and one off and ongoing %fund cost drag is entirely unwanted in the SIPP Self Managed drawdown option (which is one of several being considered and modeled to evaluate active/excess returns, fee structure, work involved etc.)

Existing scheme was pretty good in the accumulation phase - offered very cheap passive funds, and other choices latterly. Employer subsidised to some extent so wrapper fees invisible. Fund unit prices and returns match indices and declared costs.

So a compare vs a retail SIPP generates a compare of "0" vs the SIPP platform fee and the low fund option fees e.g. ~0.05 for passive

I am led to believe this scenario can create a mis-selling compliance issue at DC transfer if the scheme being offered is materially worse than the existing.

Is this the case ?

Where can one find definitive rules or is this "made up as they go along" by each SIPP provider upon application based on their regulatory compliance status and maturity in UK market ?

Is a workaround temporarily to transfer the funds into a more expensive active option or is this caught in some "look back" rule ?

Any clarifying pointers appreciated

zagfles

HL will accept the transfer (I've done one from an employer's DC scheme), and probably most other platforms.

ISTR there was some obscure case where there was a "misselling" issue doing a transfer from an occ DC scheme to a SIPP but think there were some strange circumstances.

The fact that platforms like HL are willing to take the transfer imply there isn't an issue.

tacpot12

I can't see that there would be a misselling issue if the transfer is carried out immediately prior to retirement if the client's stated requirement is to commence drawdown immediately - the current scheme doesn't offer this, so even if the new scheme has higher charges, the new scheme is not being mis-sold providing the additional costs are highlighted.

If a transfer is recommended well ahead of retirement, the new scheme might be being mis-sold. If the client's aims and risk appetite can be met within the current scheme at a lower cost than a new scheme, what is the rationale for the transfer?

Dox

gm0 wrote: »

I am led to believe this scenario can create a mis-selling compliance issue at DC transfer if the scheme being offered is materially worse than the existing.

Is this the case ?

Who 'led you to believe' - and how recently? I suspect this is the ruling which might be muddying the water: http://citywire.co.uk/new-model-adviser/news/advisers-back-fscss-due-diligence-ruling-against-sipp-providers/a1088999

sandsy

Mis-selling can only occur when there is an adviser making a recommendation.

You said there was no adviser involved so you are making your own decision to move from one DC pension to another, so the only person responsible for that sale and purchase is you.

Brynsam

sandsy wrote: »

Mis-selling can only occur when there is an adviser making a recommendation.

You said there was no adviser involved so you are making your own decision to move from one DC pension to another, so the only person responsible for that sale and purchase is you.

Mis-selling is the wrong term, but see link in post 4 above.

gm0

Thank you for the replies - "mis-selling" was poor wording due to its specific meaning.
I intended to proffer the scenario of a non-advised application to a SIPP operator potentially declined in diligence due to some view of "detriment" (on costs essentially). This sounded a bit odd and unwelcome but not completely implausible. Reassured somewhat.

Both current and intended investments are not unconventional so the core issue of the thread link on SIPP operator liability for unconventional/even fraudulent investments is indirectly relevant (i.e. if FSCS/FOS behaviour and financial risks to mainstream operators had impacted scheme diligence behaviour on both types accepted and "detriment" more generally at point of sale.

One reply questioned where this came up. It came up in one of the other scenarios where there is an advisor potentially in the mix. Perhaps it is a real issue there an IFA compliance risk or a sales control on a preferred potential platform alongside the obvious price pressure faced on fund and wrapper and advice fees in any compare on overall returns drag and SWR. So being charitable it may be a real issue for some IFAs, but just FUD for a self selected retail SIPP. This makes the IFA's life more difficult but doesn't really impact my choice - I am assuming they would strive to get their paperwork done if I was to go that way.

I have not been refused transfer. I am waiting for Vanguard to launch their UK SIPP and for pricing impact to work fully through while also assessing whether their fund selection can meet my portfolio needs and then applying and negotiating any transfer option appropriate to drawdown plans and fund size

zagfles

How would the relative costs be an issue - when I did my transfer HL wouldn't have known what costs I was paying on the workplace DC scheme, nor what I'm going to invest in with them. I could have chosen investments that were cheaper or more expensive.

ffacoffipawb

zagfles wrote: »

How would the relative costs be an issue - when I did my transfer HL wouldn't have known what costs I was paying on the workplace DC scheme, nor what I'm going to invest in with them. I could have chosen investments that were cheaper or more expensive.

I had no problem transferring an old DC employer scheme to A J Bell SIPPDEAL when that scheme was closed and the same employer opened a cheaper scheme for us with the same provider (Aviva). Even though I could have transferred it into the new scheme or left it where it was, I declined and decided to transfer.