FSA probes firm over ‘time is against us’ commission letter
The letter, sent to members of a group scheme by Rowanbank Financial Consultants, stated commission paid by the new provider would cover its costs, whereas, from next year, fees must be paid by clients directly, possibly leading to “an immediate reduction of your pension fund”.
“Time is against us,” the letter, seen by IFAonline, reads. “We only have until the end of this year to complete the transfer as the costs of doing so will rise considerably after December 2012”.
The advisory group had suggested the members may want to switch provider because a change in legislation meant their section 32 policies could now be moved penalty-free.
From January next year, commission payments from providers to intermediaries on retail investment business will be banned.
The FSA said it would not comment on individual cases, but IFAonline understands it is looking into the contents of the letter.
Rowanbank said it had taken up the matter with the regulator directly.
Members of the company pension scheme contacted by Rowanbank held section 32 contracts, also known as buyout policies, with Friends Life, formerly Friends Provident.
Rowanbank had been responsible for setting up the scheme and for arranging the individual section 32 contracts.
In its letter, Rowanbank stated that, although the company’s directors had switched pension provider – from Friends Life to Scottish Widows – in 2006, most of the section 32 policies had remained with Friends Life.
This was because legislation at the time forbade the transfer of the policies without the loss of the enhanced tax free cash entitlement, it said.
However, in its correspondence, Rowanbank said a change in legislation now meant a transfer was possible without the loss of the status. It said it had researched current section 32 providers and had selected Aegon as an “ideal solution”.
It then suggested clients interested in a transfer should “get in touch as soon as possible”.