City Trustees - part of Mattioli Woods



News and Media

23 January 2015

Pensions Perspective: What is the difference between an in specie transfer and a cash transfer?

When a client decides to transfer a pension arrangement from one provider to another, it is possible for them to transfer it on an in specie basis rather than a cash basis. In specie transfers are particularly useful if the existing arrangement has a property or where the holdings are price sensitive.

Commercial property is probably the most common asset that is transferred on an in specie basis but, as with any normal purchase, there is legal work involved and it is important to verify whether or not the transferring property is VAT opted or whether the existing or new scheme needs to be registered for VAT.

The appropriate paperwork to transfer the property, together with a new TR1 form, will need to be drafted and forwarded to Companies House confirming the new ownership details (i.e. the new trustees and a new registered address). However, there is no need to have a new lease drawn up if an existing one is in force; the landlord information can be changed when the lease is renewed.

If there are bank borrowings the bank may need new documentation to alter the trustees who are party to the loan. Checks must be made at outset as to the bank's requirements, as some lenders do not allow a variance to an existing agreement, or charge a fee for an alteration. Where the borrowings are greater than 50% of current scheme asset limits, the scheme administrator will need to seek approval from H M Revenue & Customs before the transfer can proceed.

For clients who have equity portfolios and shares, these should also be transferred in specie if possible because they are price sensitive. Individual shares will need to be re-registered using a stock transfer form, and the new provider will liaise with the appropriate brokers to ascertain whether or not new application forms are required. A similar exercise will need to be undertaken with any managed fund arrangements and bank account holdings. However, if the current or core bank account is affiliated to a particular pension provider then it may need to be closed and a cash transfer made to the new scheme bank account.

With a SSAS takeover, there is usually an alteration to the trustees, i.e. the appointment or removal of a professional trustee. As the legal entity of the SSAS remains the same, and all investments remain assets of the scheme, this is not considered a transfer. Any change to the trustees must be documented, with all assets (including property) being re-registered to reflect such changes, and there may be a requirement to alter the main scheme bank account.

 

Pension Perspective is a weekly feature from City Trustees, covering questions that our experienced sales and technical teams have received from advisers. The Q&A covers a range of subjects including property, pension contributions, protection, auto-enrolment and more.

City Trustees operates a free technical helpline for advisers for support with pension challenges. Tel: 0116 240 8731 or email: technicalhelp@citytrustees.co.uk.

 

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