BT DB Pension Advice Fee (Hub Pension Consulting)

dunstonh

idontknow2 said:

HappyHarry said:

I would check very carefully beforehand what you will be getting for your fee. The links from  @xylophone and the fact you are being charged VAT implies that you will not be receiving regulated advice on whether to transfer or retain your DB pension.

Tbh I thought I had checked it during the initial call I had with them.  I pay them the fee and then they make the assessment and advise accordingly in an impartial way?

So, why is VAT chargeable?     IFA fees are not subject to VAT unless there is no intention to buy a financial product.  Paying for transfer advice clearly indicates an intention to buy a financial product.  Pension transfer advice is not VATable.

xylophone

FCA

 Policy Statement 

PS20/6 

June 2020 

We explained in CP19/25 that Her Majesty’s Revenue and Customs (HMRC) has told us that the VAT status of transfer advice does not depend on whether the advice is to transfer or not transfer.

 Instead, it depends on whether the service provided includes negotiation on financial securities. This can apply whether or not the advice is to transfer, but does not automatically apply in either case. So the onus remains on firms to satisfy themselves, in line with HMRC’s tax manual, that they are complying with tax requirements. However, HMRC’s rules on unauthorised payments would prevent payment being made from a different pension product. 

I found this from the Personal Finance Society

VAT & Adviser

Charging

Under VAT general principles, fees or commission for advice only services are always taxable andremuneration for an intermediary service may benefit from the VAT exemption if the adviser acts as an intermediary by bringing together parties to an exempt financial service.

Intermediation, for the purposes of VAT exemption, consists of bringing together, with a view to the provision of financial services, persons who are or may be seeking to receive financial services and persons who provide financial services.

In order to qualify for exempt intermediation, an adviser would need to clearly evidence to HMRC that there has been customer specific interaction between the adviser and the product provider in relation to the sale of exempt products. Providing a customer with product provider material or information on products is not sufficient to demonstrate intermediation has taken place.

HMRC have stated that a firm would need to evidence that the customer intended to purchase a

retail investment product, following on from recommendations made by the adviser. If the customer,

subsequent to committing to effecting a policy, decides not to progress, the service would still qualify for VAT exemption as it would fall into the category of an aborted transaction.

As now, remuneration for introducing a customer to an exempt financial service, can be in the form

of fees paid by the client to the adviser and no VAT is chargeable on such fees.

Put simply, general financial advice is taxable and intermediation is VAT exempt.

Does the above mean that if the adviser does not advise /recommend the receiving scheme, VAT is payable?

dunstonh

Does the above mean that if the adviser does not advise /recommend the receiving scheme, VAT is payable?

As mentioned, it is the intention to buy a financial product/instrument (the PFS reference that).

I had assumed that the discounted service would provide intermediation as that is what an IFA service does.  Having just googled HUB, it looks like that they are not IFAs but FAs.  But the VAT principle doesn't change.

Their website says the following (copy and paste):

That does suggest that they are intermediaries.

msallen

Don't get hung up on the VAT. The OP didn't mention this, it was only introduced by a later poster who clearly has no comprehension of DB transfers.

xylophone

Don't get hung up on the VAT. The OP didn't mention this, it was only introduced by a later poster who clearly has no comprehension of DB transfers.

I've no idea how much the first poster  just to note the VAT knows about DB transfers but I think that we may be sure that Duncan and Harry, (both qualified FAs) who also reference the subject,  have adequate comprehension of DB transfers.....

HappyHarry

My apologies to the OP, who as @msallen says, hadn't mentioned VAT at all.

The fee of £875 for DB transfer advice is too low to be profitable for HUB. However, it may be that HUB are receiving separate payment from the scheme itself, so that they can provide advice to the scheme members at a lower cost.

OP, I would suggest you clarify with HUB that your £875 will provide you with regulated advice on whether to transfer or retain your DB scheme. If this is the case, it is extremely unlikely (read impossible) that you will find an alternative adviser willing to give advice for such a low fee.

@Joey_Soap commented that this set-up stinks. Unfortunately, I understand that the FCA are in favour of such tie-ups, as the adviser should, in theory, have very detailed knowledge of the scheme itself, reducing the possibilities of error in the final calculations, and potentially lowering the costs for individuals.

HappyHarry

xylophone said:

Don't get hung up on the VAT. The OP didn't mention this, it was only introduced by a later poster who clearly has no comprehension of DB transfers.

I've no idea how much the first poster  just to note the VAT knows about DB transfers but I think that we may be sure that Duncan and Harry, (both qualified FAs) who also reference the subject,  have adequate comprehension of DB transfers.....

Please, IFAs.

xylophone

Please, IFAs. 

Grovelling apologies....

dunstonh

The VAT issue really came about because you would not expect to see VAT on pension transfer advice.   The fact there is brought in the concern that the advice given is not regulated financial advice  (required for transfer) but abridged (which is not sufficient to allow a transfer to take place)

idontknow2

Thank you for the explanation and hence the suggestion from HappyHarry to ask if it's regulated advice?

I will ask Monday.

I struggle to believe it should be this difficult though to be honest.