While nine out of ten advisers believe Section 32 is the best way for the majority clients to protect their tax free cash entitlement leading up to A-Day, research shows no further activity in the market, says Scottish Equitable.
On the back of recent adviser roadshow research, Scottish Equitable finds given a choice between using S32 and relying on a block transfer to protect tax free cash, only 6% of advisers would use the latter.
Scottish Equitable says many advisers believe a block transfer, to be too risky as it relies on a transfer ‘buddy’ who may later retract on the deal, leaving the other individual standing.
Scottish Equitable says there are many individuals, with tax-free cash entitlements greater than 25% of the fund, who could take advantage of a transfer to a S32 policy, including those in poorly performing closed funds and Executive Pension Plan clients unwilling to tackle Scheme Administrator responsibilities post A-Day.
The pensions provider warns of the ‘complex’ advice procedures adding on the limited time available to effect a transfer.
Stewart Ritchie, pensions development director, says IFAs need to begin to practise what they preach. He says while it is not the solution for all cases, advisers believe it is the best solution for clients to protect tax free cash, however there is still no market indication to support this strong feeling.
He says: “It’s a complex advice issue affecting a lot of people. Time is running out and there will be absolutely no leeway from HM Revenue & Customs if an adviser misses the 6 April 2006 transfer deadline.”
A transfer to a S32 policy enables employees to transfer out of an occupational pension scheme into a personal pension.
In line with this Winterthur Life UK, announced a restructure of its S32 product in the run up to pensions simplification at the back end of last month.
The providers Life clustered Section 32 provides its members with a flexible policy available post A-Day offering investments currently in stocks, shares, gilt-edged investments, unit trusts, investment trusts, deposit funds and commercial property. ‘In specie’ transfers can also be accepted through the self-invested option.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Gareth Vorster on 020 7968 4554 or email [email protected].IFAonline
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