1. (1)

   5This section applies to a firm that gives advice or a personal recommendation about a pension transfer, a pension conversion or a pension opt-out.

2. (2)

   This section does not apply to a firm that gives advice or a personal recommendation in relation to:

   1. (a)

      a pension transfer, pension conversion or pension opt-out in relation to which the only safeguarded benefit is a guaranteed annuity rate;

   2. (b)

      a pension transfer in which the retail client proposes to transfer out of a defined contribution occupational pension scheme where that client has no safeguarded benefits under that scheme.

1If an individual who is not a pension transfer specialist gives advice or 5a personal recommendation about a pension transfer, a pension conversion5 or pension opt-out on a firm's behalf, the firm must ensure that the recommendation or advice 5 is checked by a pension transfer specialist.

A firm must:

1. (1)

   compare the benefits likely (on reasonable assumptions) to be paid under a defined benefits pension scheme or other pension scheme with safeguarded benefits5with the benefits afforded by a personal pension scheme, 5stakeholder pension scheme or other pension scheme with flexible benefits5, before it advises a retail client to transfer out of a defined benefits pension schemeor other pension scheme with safeguarded benefits5;

2. (2)

   ensure that that comparison includes enough information for the client to be able to make an informed decision;

3. (3)

   give the client a copy of the comparison, drawing the client's attention to the factors that do and do not support the firm's advice, in good time, and in any case 5no later than when the key features document is provided; and

4. (4)

   take reasonable steps to ensure that the client understands the firm's comparison and its advice.

5A firm need not carry out the comparison described in COBS 19.1.2R if:

1. (1)

   the retail client wishes to crystallise benefits immediately after the pension transfer or pension conversion; and

2. (2)

   the retail client is at normal retirement age under the rules of the ceding scheme.

3 Firms must apply the annual provisions at COBS 13 Annex 2 3.1R(6) on a monthly basis in any month where the yields on the 15th of the relevant month would give a rolling 12 month average annuity rate that varies by at least 0.2% from the previous rate.

If a firm arranges a pension transfer or pension opt-out for a retail client as an execution-only transaction, the firm must make, and retain indefinitely, a clear record of the fact that no personal recommendation was given to that client.

When a firm prepares a suitability report it must:

1. (1)

   (in the case of a personal pension scheme), explain why it considers the personal pension scheme to be at least as suitable as a stakeholder pension scheme; and

2. (2)

   (in the case of a personal pension scheme, stakeholder pension scheme or2FSAVC) explain why it considers the personal pension scheme, stakeholder pension scheme or2FSAVC to be at least as suitable as any facility to make additional contributions to an occupational pension scheme, group personal pension scheme or group stakeholder pension scheme23 which is available to the retail client.

   232

When a firm promotes a personal pension scheme, including a group personal pension scheme, to a group of employees it must:

1. (1)

   be satisfied on reasonable grounds that the scheme is likely to be at least as suitable for the majority of the employees as a stakeholder pension scheme; and

2. (2)

   record why it thinks the promotion is justified.

1. (1)

   When a firm sells, personally recommends or arranges1 the payment of an AVC contribution by a member of an occupational pension scheme to be secured by a packaged product purchased by the scheme trustees, it must give the trustees sufficient information to pass to the relevant member for that member to be able to make informed comparisons between the AVC and any alternative personal pension schemes and stakeholder pension schemes available.1

2. (2)

   This rule applies to an AVC where members' benefits are linked to the earmarked segments of a life policy or scheme, but it does not apply to an AVC where the trustees make pooled investments and have their own arrangements for allocating investment returns to determine members' AVC benefits.

In this section:

1. (1)

   ‘intended retirement date’ means:

   1. (a)

      the date (according to the most recent recorded information available to the provider) when the scheme member intends to retire, or to bring the benefits in the scheme into payment, whichever is the earlier; or

   2. (b)

      if there is no such date, the scheme member's state pension age;

2. (2)

   ‘open market options' means the options available to a scheme member3 to use the proceeds of a personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract on the open market; and

   33
3. (3)

   'open market options statement' means the information specified in COBS 19.4.1A R which is provided in a durable medium to assist the retail client to make an informed decision about their open market options.3

   3

3An open market options statement must include:

1. (1)

   the fact sheet "Your pension: it’s time to choose" available on www.moneyadviceservice.org.uk or a statement that gives materially the same information;

2. (2)

   a summary of the retail client's open market options, which is sufficient for the client to be able to make an informed decision about whether to exercise, or to decline to exercise, open market options;

3. (3)

   information about the retail client'spersonal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract provided by the firm, including:

   1. (a)

      the sum of money that will be available to exercise open market options;

   2. (b)

      whether any guarantees apply and, if so, information about how the guarantees work;

   3. (c)

      any other relevant special features, restrictions, or conditions that apply, such as (for with-profits funds) any market value reduction conditions in place; and

   4. (d)

      any other information relevant to the exercise of the retail client's open market options; and

4. (4)

   a clear and prominent statement about the availability of the pensions guidance including:

   1. (a)

      how to access the pensions guidance and its contact details;

   2. (b)

      that the pensions guidance can be accessed on the internet, telephone, or face to face;

   3. (c)

      that the pensions guidance is a free impartial service to help consumers to understand their options at retirement; and

   4. (d)

      a recommendation that the client seeks appropriate guidance or advice to understand their options at retirement.

1. (1)

   If a retail client asks a firm for a retirement quotation more than four months before the client’s intended retirement date, the firm must give the client an open market options3 statement with or as part of its reply, unless the firm has given the client such a statement in the last 12 months.

   3
2. (2)

   If a firm does not receive such a request, it must provide a retail client with an open market options3 statement between four and six months before the client’s intended retirement date.

   3

The firm must:

1. (1)

   remind the retail client about the open market options statement;3

   3
2. (2)

   tell the client what sum of money will be available to exercise open market options;3

   3
3. (3)

   remind the client about the availability of the pensions guidance; and3

4. (4)

   make a recommendation that the client seeks appropriate guidance or advice to understand their options at retirement;3

at least six weeks before the client’s intended retirement date.

If a retail client with an open market options3 tells a firm that he is considering, or has decided:

1. (1)

   to discontinue an income withdrawal arrangement; or

2. (2)

   to take a further sum of money from his pension to exercise open market options;3

   3

the firm must give the client an open market options3 statement, unless the firm has given the client such a statement in the last 12 months.

1. (1)

   3Where a firm communicates with a retail client about the retail client'spersonal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract which is provided by the firm, unless the circumstances in (2) apply, the firm must3:

   1. (a)

      refer to the availability of the pensions guidance;3

   2. (b)

      offer to provide the client with information about how to access the pensions guidance; and3

   3. (c)

      [deleted]3

   4. (d)

      include3 a recommendation that the client seeks appropriate guidance or advice to understand their options at retirement.

2. (2)

   A firm is not required to provide the client with the statement required in (1) where:

   1. (a)

      the firm communicates with the client for a purpose other than:

      1. (i)

         encouraging the client to think about their open market options3; or

      2. (ii)

         facilitating access to the proceeds of the client’spersonal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract; or

   2. (b)

      the client has already accessed the pensions guidance; or3

   3. (c)

      the client has already received advice from a firm on their open market options, for example from an independent financial adviser; or3

   4. (d)

      the firm is providing the client with an open market options statement or six-week reminder in accordance with COBS 19.4.2R, COBS 19.4.3R or COBS 19.4.4R.3

3If a firm receives an application from a retail client to access some or all of the proceeds of a personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract, the firm must provide the client with a description of the tax implications before the client accesses those proceeds.

3A firm is not required to provide the information specified in COBS 19.4.7 R where it is provided in accordance with COBS 14.2.1 R.

This section applies to a firm which operates a relevant scheme in which there are at least two relevant policyholders.

1. (1)

   Subject to COBS 19.5.3 R, a firm must establish an IGC.

2. (2)

   This rule does not apply to a firm ('Firm A') if another firm in Firm A's group has made arrangements under this section for an IGC to cover relevant schemes operated by Firm A.

1. (1)

   If a firm considers it appropriate, having regard to the size, nature and complexity of the relevant schemes it operates, it may establish a governance advisory arrangement instead of an IGC.

2. (2)

   If a firm has decided to establish a governance advisory arrangement rather than an IGC, this section (other than COBS 19.5.9R (2), COBS 19.5.9R (3), COBS 19.5.10 G, COBS 19.5.11 R and COBS 19.5.12 G) apply to the firm by reading references to the IGC as references to the governance advisory arrangement.

3. (3)

   A firm must establish a governance advisory arrangement on terms that secure the independence of the governance advisory arrangement and its Chair from the firm.

A firm must include, as a minimum, the following requirements in its terms of reference for an IGC:

1. (1)

   the IGC will act solely in the interests of relevant policyholders;

2. (2)

   the IGC will assess the ongoing value for money for relevant policyholders delivered by relevant schemes particularly, though not exclusively, through assessing:

   1. (a)

      whether default investment strategies within those schemes:

      1. (i)

         are designed and executed in the interests of relevant policyholders;

      2. (ii)

         have clear statements of aims and objectives;

   2. (b)

      whether the characteristics and net performance of investment strategies are regularly reviewed by the firm to ensure alignment with the interests of relevant policyholders and that the firm takes action to make any necessary changes;

   3. (c)

      whether core scheme financial transactions are processed promptly and accurately;

   4. (d)

      the levels of charges borne by relevant policyholders; and

   5. (e)

      the direct and indirect costs incurred as a result of managing and investing, and activities in connection with the managing and investing of, the pension savings of relevant policyholders, including transaction costs;

3. (3)

   the IGC will raise with the firm'sgoverning body any concerns it may have in relation to the value for money for relevant policyholders delivered by a relevant scheme;

4. (4)

   the IGC will escalate concerns as appropriate where the firm has not, in the IGC's opinion, addressed those concerns satisfactorily or at all;

5. (5)

   the IGC will meet, or otherwise make decisions to discharge its duties, using a quorum of at least three members, with the majority of the quorum being independent;

6. (6)

   the Chair of the IGC will be responsible for the production of an annual report setting out:

   1. (a)

      the IGC's opinion on the value for money delivered by relevant schemes, particularly against the matters listed under (2);

   2. (b)

      how the IGC has considered relevant policyholders' interests;

   3. (c)

      any concerns raised by the IGC with the firm'sgoverning body and the response received to those concerns;

   4. (d)

      how the IGC has sufficient expertise, experience and independence to act in relevant policyholders' interests;

   5. (e)

      how each independent member of the IGC, together with confirmation that the IGC considers these members to be independent, has taken into account COBS 19.5.12 G;

   6. (f)

      the arrangements put in place by the firm to ensure that the views of relevant policyholders are directly represented to the IGC.

A firm must:

1. (1)

   take reasonable steps to ensure that the IGC acts and continues to act in accordance with its terms of reference;

2. (2)

   take reasonable steps to provide the IGC with all information reasonably requested by the IGC for the purposes of carrying out its role;

3. (3)

   provide the IGC with sufficient resources as are reasonably necessary to allow it to carry out its role independently;

4. (4)

   have arrangements to ensure that the views of relevant policyholders can be directly represented to the IGC;

5. (5)

   take reasonable steps to address any concerns raised by the IGC under its terms of reference;

6. (6)

   provide written reasons to the IGC as to why it has decided to depart in any material way from any advice or recommendations made by the IGC to address any concerns it has raised;

7. (7)

   take all necessary steps to facilitate the escalation of concerns by the IGC under COBS 19.5.5R (4) and COBS 19.5.6G (5); and

8. (8)

   make the terms of reference and the annual report of the IGC publicly available.

1. (1)

   A firm must take reasonable steps to ensure that the IGC has sufficient collective expertise and experience to be able to make judgements on the value for money of relevant schemes.

2. (2)

   A firm must recruit independent IGC members through an open and transparent recruitment process.

3. (3)

   A firm must appoint members to the IGC so that:

   1. (a)

      the IGC consists of at least five members, including an independent Chair and a majority of independent members;

   2. (b)

      IGC members are bound by appropriate contracts which reflect the terms of reference in COBS 19.5.5 R, and on such terms as to secure the independence of independent members;

   3. (c)

      independent IGC members who are individuals are appointed for fixed terms of no longer than five years, with a cumulative maximum duration of ten years;

   4. (d)

      individuals acting as the representative of an independent corporate member are appointed to the IGC for a maximum duration of ten years;

   5. (e)

      independent IGC members who are individuals, including those representing independent corporate members, are not eligible for reappointment to the IGC until five years have elapsed, after having served on the firm'sIGC for the maximum duration of ten years;

   6. (f)

      appointments to the IGC are managed to maintain continuity in terms of expertise and experience of the IGC.

The firm, in appointing independent IGC members, must determine whether such a member is independent in character and judgement and whether there are relationships or circumstances which are likely to affect, or could appear to affect, that member’s judgement.

This section applies to an operator of a qualifying scheme.

The restrictions on administration charges in COBS 19.6.4 R do not apply in relation to a default arrangement under which, at any time before benefits come into payment, those benefits accruing to the member involve, or involve an option to have, a promise by or to be obtained from a third party about the rate or amount of those benefits.

A firm, for a default arrangement within a qualifying scheme, may only make, impose or otherwise facilitate payment of an administration charge1 by way of an accrued rights charge or a combination charge structure where:

1. (1)

   the limits in COBS 19.6.6 R are not exceeded; or

2. (2)

   the firm has obtained appropriate express agreement to exceed the limits and the following conditions are satisfied:

   1. (a)

      the express agreement contains an acknowledgement by the member that the administration charge1 for the service is likely to exceed the limits;

   2. (b)

      giving such express agreement is not a condition of becoming or remaining a member of the qualifying scheme;

   3. (c)

      express agreement has not been given for services which the operator must provide under the regulatory system or the general law, or which are core services.

The limits on administration charges are as follows:

1. (1)

   for a qualifying scheme which uses only an accrued rights charge, 0.75% of the value of those accrued rights;

2. (2)

   for a qualifying scheme which uses a combination charge scheme:

   1. (a)

      for the flat-fee charge element, £25 annually;

   2. (b)

      for the contribution percentage charge element, 2.5% of the contributions annually;

   3. (c)

      for the associated accrued rights charge, the limits as set out in column 2 of the table in COBS 19.6.7 R.

1. (1)

   A firm must not make any administration charge,1 or otherwise make or facilitate any payment or provide any non-monetary benefit, in respect of any service provided by a third party in connection with a qualifying scheme which would have the effect of decreasing the value of the accrued rights of any member of that scheme.2

   2
2. (2)

   The restriction in (1) does not apply where the firm has obtained express agreement from the relevant member to such a payment.

2A firm must not impose greater administration charges1 on a member of a qualifying scheme whose workplace pension contributions ceased on or after 6 April 2016 than those imposed on a member for whom such contributions are still being made.

In this section:

1. (1)

   [deleted]2

2. (2)

   “pension decumulation product” is a product used to access pension savings and includes:2

   1. (a)

      a facility to enable a retail client to make an uncrystallised funds pension lump sum payment; 2

   2. (b)

      an option to take a small lump sum payment; 2

   3. (c)

      a drawdown pension; and2

   4. (d)

      a pension annuity; 2

3. (3)

   “pension savings” is the proceeds of the client'spersonal pension scheme, stakeholder pension scheme, or occupational pension scheme;

4. (4)

   “retirement risk warnings” are the warnings required to be given to a retail client at step 3 of the process specified in this section;

5. (5)

   “risk factors” are the attributes, characteristics, external factors or other variables that increase the risk associated with a retail client's decision to access their pension savings using a pension decumulation product;

6. (6)

   “signpost” is the written or oral statement encouraging a retail client to use pensions guidance or to take regulated advice to understand their options at retirement which is at step 1 of the process specified in this section.

This section applies to a firm communicating with a retail client in relation to accessing their pension savings using a pension decumulation product.

This section does not apply:

1. (1)

   to a firm giving regulated advice to a retail client on options to access their pension savings;

2. (2)

   if the firm has already provided the retirement risk warnings to the retail client in relation to their decision to access their pension savings and the firm has reasonable grounds to believe that the retirement risk warnings are still appropriate for the client.

A firm must follow the steps specified in this section at the point when the retail client has decided (in principle) to take one of the following actions (and before the action is concluded):

1. (1)

   buy a pension decumulation product; or

2. (2)

   vary their personal pension scheme, stakeholder pension scheme, FSAVC, retirement annuity contract or pension buy-out contract to enable the client to:

   1. (a)

      access pension savings using a drawdown pension; or

   2. (b)

      elect to make one-off, regular or ad-hoc uncrystallised funds pension lump sum payments2; or

3. (3)

   receive a one-off, regular or ad-hoc uncrystallised funds pension lump sum payment2; or

4. (4)

   access their pension savings using a drawdown pension; or2

5. (5)

   withdraw the funds in full from their pension savings, reducing the value of their rights to zero.2

1. (1)

   The first step is to ask the retail client whether they have received pensions guidance or regulated advice:

   1. (a)

      if the client says that they have, the firm must proceed to step 2; or

   2. (b)

      if the client says that they have not or is unsure, the firm must explain that the decision to access pension savings is an important one and encourage the retail client to use pensions guidance or to take regulated advice to understand their options at retirement.

2. (2)

   If, after giving the explanation in COBS 19.7.8R (1)(b), the retail client does not want to access pensions guidance or take regulated advice, the firm must proceed to step 2.

Based on how the retail client wants to access their pension savings, at step 2 the firm must ask the client questions to identify whether any risk factors are present, except where COBS 19.7.9AR applies2.

2If the value of the retail client’s pension savings is £10,000 or less and there are no safeguarded benefits, the firm:

1. (1)

   is not required to ask questions to identify whether any risk factors are present; and

2. (2)

   must prepare appropriate retirement risk warnings based on the risk factors relevant to each pension decumulation product it offers to enable retail clients to access their pension savings.

2A firm may ask the client the questions required by COBS 19.7.9R before the client has decided (in principle) to take one of the actions specified in COBS 19.7.7R to access their pension savings.

2If, to complete step 2, a firm relies on information gathered prior to the client’s decision to access their pension savings, the firm must be satisfied that this information is relevant, accurate and up-to-date before giving the risk warnings at step 3.

A firm must prepare the questions required by COBS 19.7.9 R before taking the steps for the first time, and must keep the questions up to date.

At step 3:2

1. (1)

   if the value of the retail client's pension savings is £10,000 or less and there are no safeguarded benefits, based on how the retail client wants to access their pension savings, a firm must give the client the appropriate retirement risk warnings prepared under COBS 19.7.9AR(2); and 2

2. (2)

   in all other cases, a firm must give the retail client appropriate retirement risk warnings in response to the client's answers to the firm's questions.2

A firm must prepare the retirement risk warnings required by COBS 19.7.13 R in good time before taking the steps for the first time, and must keep them up to date.

When communicating the signpost and retirement risk warnings, the firm must do so clearly and prominently.

Whatever the means of communication, the firm must ensure that the retail client cannot progress to the next stage of the sale unless the relevant signpost or retirement risk warning has been communicated to the client.

Firms must record whether the retail client has received:

1. (1)

   the retirement risk warnings at step 3 of the process specified in this section;

2. (2)

   regulated advice; and

3. (3)

   pensions guidance.