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Pensions: In-specie transfers – how paraplanners can help the client

5 April 2021

Stephen McPhillips, technical sales director, Dentons Pension Management, explains the process of in-specie transfer of assets between SIPPs, the challenges involved and what paraplanners can do to help the client

First things first; what is an in-specie transfer? Typically, an in-specie transfer will involve an asset or assets of a registered pension scheme being legally re-registered from one scheme across to another.

The terms “re-registration” and “in-specie transfer” are often used interchangeably. Hence, rather than an asset being sold to create cash, which in turn is then transferred to the receiving scheme as cash, in an in-specie transfer situation, the asset is not sold. Instead, the asset is retained “as is” and the legal ownership is changed through the re-registration process.

Once this process is complete, the asset has been moved legally from one scheme to another, representing some/all of the member’s benefit entitlement moving from transferring to receiving schemes.

Why transfer in this way?

There could be a number of reasons why the member may not wish to dispose of the asset to enable a transfer to take place.

One such reason may be the fact that the asset is illiquid and/or has a limited or no secondary market and cannot easily be sold to create cash to enable a pension transfer/switch to take place.

Another reason may be that the asset’s value is currently depressed (perhaps due to adverse market movements) and the member does not wish to crystallise an investment loss.

One further reason could be that the member wishes to retain the asset whilst wishing to change pension scheme provider; perhaps because of service/administration issues with the current provider.

Whatever the reason, in-specie transfers are reasonably common in self invested pension schemes such as self invested personal pensions (SIPPs) or small self administered schemes (SSAS).

What are the challenges?

One of the challenges surrounding an in-specie transfer is the question over whether the receiving scheme will actually accept the asset to be transferred in this way; much will depend on the nature of the asset itself. If an asset is deemed by the receiving scheme to be in some way ‘toxic’ or difficult to administer, it might reject it using its absolute discretion to accept or reject proposed investments. Another challenge might be a potential cost for the provider’s due diligence work on the asset to be transferred; a charge might apply regardless of whether the asset is accepted or rejected.

Another potential challenge is the situation where a member has fully crystallised their benefits within the transferring scheme and one or more of the assets has been rejected by the receiving scheme. It is not possible to make a partial transfer when fully crystallised, so it’s all or nothing at all when it comes to transferring; some/certain assets cannot simply be left behind in the transferring scheme in these circumstances. That may prevent a member from transferring/switching from one arrangement to another.

A further challenge might come in the form of the overall cost to make the in-specie transfer. The nature of these generally mean that additional work is required on the parts of both transferring and receiving schemes because of the need to carefully ensure that the asset is properly and fully re-registered into the new arrangement. That additional work may result in higher provider fees being charged when compared to a straightforward cash transfer. In addition, certain assets (such as direct commercial property investment) will require input from a solicitor (with the attendant fees) to ensure that the proper legal processes are followed to record the change in legal ownership.

Something also to be borne in mind is the fact that in-specie transfers typically take longer to complete than a cash transfer. That might have an impact on, say, benefit payments to the member unless carefully managed.

Finally, in relation to potential challenges, the asset itself must be capable of being legally re-registered from one arrangement to another and many are not. For example, many life company legacy insured funds are unlikely to be capable of re-registration because of their ownership structure.


Is it best simply to disinvest first and then transfer in cash form? That, of course, is a decision for the adviser firm and it will be made in light of its compliance procedures and client requirements. However, some points for consideration may be:

  • Will disinvestment crystalise a substantial loss, or indeed lock-in a gain?
  • Can the asset actually be valued currently?
  • Can the asset actually be sold to create cash currently (e.g. is it a suspended fund)?
  • Does the client wish to retain the asset, but change the provider (perhaps because of poor service, high charges, etc. as noted above)?
  • Do the costs of in-specie transfer outweigh the convenience and speed of a cash transfer?

How can paraplanners help?

So, how can paraplanners best help the client when it comes to in-specie transfers?

As outlined above, there are many factors that can influence the nature of a pension transfer / switch and the form it takes. Most clients will benefit from guidance on the pros and cons of the different options that might apply in their circumstances. Indeed, most clients will need guidance on whether any options, other than a cash transfer, actually exist for them.

In addition to professional guidance on possible options, paraplanners can add great value to the client relationship by searching the market for providers that can meet the clients’ needs and also providers that can be relied upon to complete the task efficiently and in a cost-effective manner – perhaps as a result of delivering consistently award-winning service.

Being aware of the specific nature, various guises and potential costs of in-specie transfers is therefore vital for any paraplanners involved in the pension switching advice process; cash may not always be ‘king’.

A process map

Requirements are likely to vary between providers/scheme administrators, but a potential process for an in-specie transfer from SIPP to SIPP might be as follows:

  • New SIPP – assesses acceptability of asset(s) in principle for inclusion in its SIPP
  • New SIPP – outlines likely charges for the in-specie transfers of the asset(s)
  • New SIPP – established, as a vehicle into which the asset(s) is / are transferred
  • New SIPP – liaises with existing SIPP regarding asset(s) to be transferred
  • Member – appoints Solicitor(s) to act for existing SIPP (transferring scheme) and new SIPP (receiving scheme) in the legal transfer of property from SIPP to SIPP (if applicable)
  • New SIPP – appropriate platform / stockbroking accounts opened to receive assets (if applicable)
  • New SIPP – confirms ownership of asset(s) once re-registration process is complete

What are the timescales?

In respect of realistic timescales for transfer – and the impact of the pandemic on them – timescales will naturally vary depending on the asset(s) to be transferred and the providers involved. Whilst it might be possible for investment funds to be re-registered within a few weeks, it could take several months for a commercial property or other complex assets to be transferred, and this should also be borne in mind when considering whether to transfer assets between schemes rather than cash.

In some cases, the pandemic may have affected timescales due to staff absence through illness, furlough and so on, although those providers that implemented robust processes to deal with the problem may have continued to deliver high quality service that resulted in fewer delays than might have been expected under the circumstances.

This article was first published in the April 2021 issue of Professional Paraplanner.

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