S32, S226 and pension transfers
Written on 10/08/2018

Whether a transfer is for the immediate vesting of benefits or not is now irrelevant. 

A transfer that would previously not have been a pension transfer as it was for immediate vesting is now a pension transfer.

Firms can apply for limited permissions.

For example, if they wanted to avoid occupational transfers but continue to be allowed to deal with individual policies with guaranteed annuity rates, they could apply for permission to do this only. 

These permissions usually read on the FCA register as “limited to transfers of guaranteed annuity rates…” 

The big limitation of this limited permission is the inability to transfer S32 plans if they include a GMP.  GMP means A guarantee to pay a minimum pension regardless of the size of the pension fund value - usually due to Contracting out of SERPs/S2P.  To transfer these you need Full pension transfer permission.  See http://www.legislation.gov.uk/ukpga/1993/48/pdfs/ukpga_19930048_301118_en.pdf and see in particular 2.24 of https://www.fca.org.uk/publication/policy/ps15-12.pdf.

But not all S32 include GMP – so you need to check that one too. 

What you can do with this limited permission is transfer RACs or Section 226’s – because most of these are with guaranteed annuities only, even if they have With Profit guarantees in them, this permission allows you to transfer them. 

Safeguarded benefits

The term safeguarded benefits are referred to within the rules for both pension transfer and pension conversion.

So what are safeguarded benefits?

In the Pensions Schemes Act safeguarded benefits are explained in the negative, i.e. benefits other than:

  • money purchase benefits, and
  • cash balance benefit. 

It should also be remembered that the HMRC definition of money purchase benefits and the DWP version are, knowingly and consciously different.  You couldn’t make it up, could you?

The PS 16/12 confirmed any other type of benefit will be regarded as safeguarded benefits, including:

  • Defined Benefit schemes
  • Guaranteed annuity rates (GAR's)
  • Any deferred annuity rate
  • Guaranteed basic annuity.

Pension Transfer Specialists

The advice of a Pension Transfer Specialist is required for most pension transfers involving safeguarded benefits above the value of £30,000, regardless of when the transferred benefits are being crystallised.  Areas requiring a Pension Transfer Specialist include:

  • Transfer of Defined Benefits to Defined Contribution schemes
  • Transfers of Occupational DC schemes, with safeguarded benefits, to personal pension or stakeholder pension schemes
  • S32 transfers where the policy contains safeguarded benefits i.e. GMP
  • Where a client is given advice to opt-out of an occupational pension scheme

This could lead to interesting scenarios where the value of a Guaranteed Annuity Rate is in excess of £30,000 but due to its loss on transfer or conversion it is lower than £30,000.

It appears the intent in this case is that appropriate advice is required.

Transfer permissions but no Pension Transfer Specialist!

There are exceptions to the above. 

Where the advice is on conversions or transfers in respect of pension policies with a guaranteed annuity rate (GAR). 

Although GARs are safeguarded benefits, the FCA has decided not to require these cases to undergo a TVAS or be checked by a Pension Transfer Specialist.

As such advice can be provided by an adviser with investment advice permission, as long as their firm has the appropriate permission to conduct transfer business.
Secondly, pension transfers from occupational DC schemes, without any safeguarded benefits can now be transacted by an individual within a firm that has the transfer permissions without the need for that advice to be authorised by a pension transfer specialist.

Rule references COBS 19 and PERG 2.7.16

Transfer from Scheme Type


Scheme Type

Pension transfer

& opt out

permission required?


DC OPS without

Safeguarded Rights

DC / OPSYES – either with full permission or restricted to limited transfer activity only

DC OPS without

safegarded Rights

S32 / PPYES - either with full permission or restricted to limited transfer activity only

DC OPS with

Saftegarded Rights


DC OPS with

Safeguarded Rights

S32 /  PPYES

S32 wtih

Safeguarded Rights


S32 with

Safeguarded Rights


S32  without

Safeguarded Rights



safeguarded rights



Safeguarded Rights

PP/RAC/FSAVC without
Safeguarded Rights
PP/RAC/FSAVC without
Safeguarded Rights

nb: EPPs are DC OPS

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