Pension freedom - Recording the right information

Pension freedom: are you recording the right information?

How a function within Adviser Office can help you keep on top of pension freedom changes.

A couple of years ago, the FSA, as it was at the time, did a schematic review on pensions, particularly SIPPs. They wanted to know the number of cases in full drawdown, partial drawdown, partial annuitisation etc. They also wanted to know where income was being taken, and how this income was being paid.

For a lot of IFA firms, that resulted in a time-consuming manual analysis of records. For Adviser Office users, this resulted in us recommending the use of User Defined Search Keys to record this information for future such reviews. These were fine at the time, as most income benefits were consolidated into one plan before income was taken, so a single option box worked well.

That is not going to be the case going forward. If a client is going to take advantage of the new pension freedom and withdraw the whole of their cash from a fund, it is pointless to transfer it first. User Defined Search Keys, or the equivalent on other database systems, therefore become obsolete and we need to look at marking the plans directly.

From past experience and from what we know are likely to be the key areas of concern in the future, we still need to identify where a plan is in drawdown, what the status of that plan is, and what type of income is being taken.

We therefore suggest using Activity Entries in Adviser Office, and the equivalent functionality in the other systems, to maintain this data.

By using the functionality to tag a plan itself, individual pension plans can be marked and the search functionality within the system can then be used to easily extract the relevant information when it is required.

The two areas that need recording can be found below.

Pension status

The following are the required options:-

  • Not in drawdown – No UFPLS
  • Full Drawdown – No UFPLS
  • Partial Drawdown – No UFPLS
  • Not in drawdown – UFPLS Taken
  • Full Drawdown – UFPLS Taken
  • Partial Drawdown – UFPLS Taken
  • By all means substitute UFPLS for ‘taxable cash’ if you wish.

It is important that this entry is eventually added to every active or paid-up pension policy. For this entry type, there will be just one linked per plan and it will change as the status of the plan changes.

Pension income categorisation

The following are the required options:-

  • Capped
  • Flexi Access
  • Capped Transferred to Flexi Access

This entry will only be added when a plan is in drawdown and there will be one entry per drawdown event (per tranche). Therefore a phased drawdown plan will have more than one entry if more than one crystallisation event takes place.

Need help?

A worksheet on implementing this is available for Adviser Office users – please get in touch or call 0191 258 5785 to request a copy. We would be happy to talk through the options for those using other systems.