Adviser Charging and Pensions

In general, a pension scheme can make a payment to a financial adviser for the advice given to the member for that scheme. The payment can cover many aspects of advice and also include costs of implementation and administration fees in relation to the advice given. The three key rules that have to be met are:

  1. The payment is as a consequence of a genuinely commercial arrangement between the member and the adviser.
  2. The adviser's remuneration is appropriate to the service provided.
  3. The service provided must relate to the pension scheme in question.

As long as these rules are met, payment from the scheme to the financial adviser will not be subject to unauthorised payment charges.

Special Situations

Adviser Charging on taking retirement benefits

On Annuity Purchase

  1. The adviser charge taken from an immediate annuity can only relate to pension advice on retirement that led to the annuity purchase. Other advice relating to pension funds which are being left in force cannot be included in the charge deducted from the funds being crystallised, and must be taken elsewhere.
  2. If the charge is deducted by the ceding scheme the tax free cash payable reduces by 25% of the Adviser Charge.
  3. If the charge is deducted by the annuity provider the amount of tax free cash that can be paid is unaffected (the Adviser Charge is effectively treated as part of the annuity purchase price).

On designating to Income Drawdown

  1. If the charge is deducted before designating funds for drawdown the tax free cash reduces by 25% of the Adviser Charge.
  2. If the charge is deducted from the drawdown fund the tax free cash amount that can be paid is unaffected.

The HM Revenue & Customs guidance can be accessed here.

The information provided in this article is not intended to offer advice.

It is based on Old Mutual Wealth's interpretation of the relevant law and is correct at the date shown at the top of this article. While we believe this interpretation to be correct, we cannot guarantee it. Old Mutual Wealth cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.

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