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Who is this article for?
Advisers requesting a pension transfer as a re-registration of assets.
Key takeaways
Enhanced pension flexibility
With enhanced flexibility, the Collective Retirement Account (CRA) provides you with the freedom to create the solutions your clients need. The CRA has always allowed transfers to be made by cash, and now this is also possible by re-registering assets.
Process overview
Before requesting a pension transfer as a re-registration of assets, it is important to understand the process involved and the due diligence you, as the adviser, need to undertake.
To give you a quick overview of the re-registration process we’ve outlined the most important parts of the process you should be thinking about.
A simple in-specie transfer usually takes six weeks to complete.
It is important to manage your client’s expectations regarding how long the re-registration process takes. It is not uncommon for these processes to take over 45 working days. Some more complex cases can take six months or more.
The initial part of the process is one of investigation by the pension schemes involved.
- The receiving scheme will need to discover what assets can be re-registered.
- The transferring scheme will need to establish which assets need to be converted to a common share class.
If this investigation process is supported by the digital sharing of information, it can be quickly concluded. If investigations are manual, extra time will be required.
Before requesting a re-registration transfer you will need to check with the pension schemes and the investment managers involved to understand their approach.
As soon as the transfer request is received by the transferring scheme your client’s pension plan is essentially frozen until the transfer is complete. This is likely to include all transactions such as switches, withdrawing benefits and fee payments, so you will need to plan for this temporary freeze and the impact it could have on your client before you start the process.
The ability to trade, withdraw benefits or settle fees via the receiving scheme is only unlocked when all elements of the transfer have arrived.
Please note that with the CRA (and the other products we offer) it is not possible to take an initial fee on a re-registration case, so any fee due would need to be settled by an ad hoc deduction. Read our helpful guide on how to take an ad-hoc adviser fee.
The final element of the transfer is usually a residual cash sweep which settles any accrued distributions and cash balances in the transferring scheme.
In addition to the transferring and receiving scheme, the underlying fund management groups also play a role.
If the transferring scheme is signed up to digital re-registration standards and the underlying fund groups are able to manage digital instructions, this reduces the amount of manual processing required.
Before requesting a registration transfer you will need to check with the pension schemes and the investment managers involved to understand their approach.
The key consideration in this process is that fund groups who are not digitally enabled will require wet signatures to be supplied on stock transfer forms. This is likely to extend the timelines as authorisation, transmission and receipt processes will all be manual.
The fund groups also need to send a confirmation to the receiving scheme once the new custody has been accepted. For many groups, this confirmation is automated. It could be that this process takes longer when it involves offshore funds. It is important to note that this procedure sits with the transferring scheme and until the confirmation has been sent, the receiving scheme cannot complete the transfer and set the new pension plan live.
Advisers and their client have little influence over the process once it has begun. The process is largely set by the ability for the pension schemes and fund groups to deal with instructions electronically. If any of these deal with instructions manually then you should expect the process to take a considerable amount of time.
Quilter will chase fund groups and transferring schemes at regular intervals during the process.
If one or more of the parties follow a manual process, you should expect the overall process to take over 45 working days.
The transferring scheme is responsible for most of activity in the process. They are responsible for issuing stock transfer forms and chasing those forms through the process.
Receiving schemes are unable to request asset movements or deal directly with the fund groups. They are unable to influence the pace at which a re-registration can complete.
Clients who plan to withdraw benefits soon or who are already withdrawing benefits as the re-registration transfer could delay the payment of benefits.
The industry standard for these transfers does not require P45 details to be provided as part of the transfer. This means that transferring a client in drawdown by reregistration could trigger an emergency tax code until HMRC update the client’s tax code.
In these situations, a cash transfer should be considered.
Read our guide to income tax on the Collective Retirement Account.
Transferring schemes will use common share classes to undertake the re-registration. If a better available share class exists in the receiving scheme, the customer must be offered an option to convert into the preferential version. For the CRA we will carry out that conversion automatically, where it is in the best interest of the customer. If such a conversion is in progress within a CRA, the other re-registered assets are all still available to trade.
To complete a pension re-registration transfer we must receive all assets as confirmed by the fund manager, any cash element as part of the customer's account and the payment breakdown from the transferring scheme.
