PCLS Suitability Reports

Hi all,

I am looking to find out some information on whether a SR is required each time a client takes income from their pension as a PCLS payment. We are currently moving a client from capped drawdown to flexi-access and in turn taking the remaining part of his PCLS, therefore i am producing a SR. However, for ongoing clients already in FA drawdown, i wasn't sure whether a new SR was required each time PCLS was taken.

Any guidance would be greatly appreciated.



  • DanAtkinsonUKDanAtkinsonUK Member
    edited August 2018

    My view is that they are separate crystallisation events you should be reconsidering whether the taxable income should be through FAD (zero income) or annuity purchase. CY A is then relevant for the decision to defer.
    Hope that helps Luis

    Chartered Financial Planner FPFS APP Chartered MCSI
    Head of Technical at EQ Investors

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  • edited August 2018

    I'd say yes too, unless you had originally planned for it to happen as part of an income strategy (like phased drawdown).

  • Thank you both for your replies.

    Generally most of the time it is part of an income strategy already agreed with the client, and we save the client confirmation as an audit trail. Assuming this should suffice instead of new SR's each time.

    Appreciate the help.

  • I agree with Dan and Aron. Every time as per COBS 9.4.1(3).

    I don't take the position that critical yield A automatically applies though. It's never been a regulatory requirement and if the client isn't going to buy an annuity it doesn't add any value in my opinion.
    Benjamin Fabi FPFS
    Chartered Financial Planner

  • JonaJona Member

    I agree this Dan and Aron too. You are moving from one accumulation product to a decumulation product.

    Albeit our - large national - network takes a different view (which I find odd given the pedantic stance they take on a lot of things)

    So we do a short SR anyway.

  • I thought CYA was a regulatory requirement i.e. we had to use it to compare/consider annuity purchase. It still goes in all of our drawdown letters so I would be delighted to be able to take it out!

  • Not for drawdown. It came from PIA regulatory update 55, 20 years ago. Before freedoms it was commonly accepted as a best practice.

    But if the client isn't ever going to be buying an annuity then it has never served a purpose and has never been a requirement.
    Benjamin Fabi FPFS
    Chartered Financial Planner

  • Interesting, thanks Benjamin. The annuity comparison does seem like an irrelevance for a growing number of clients nowadays.

  • COBS 9.4.1
    Providing a suitability report
    COBS 9.4.1R03/01/2018
    A firm must provide a suitability report to a retail client if the firm makes a personal recommendation to the client and the client:

    (1) acquires a holding in, or sells all or part of a holding in:
    (a) a regulated collective investment scheme;
    (b) an investment trust where the relevant shares have been or are to be acquired through an investment trust savings scheme;
    (c) an investment trust where the relevant shares are to be held within an ISA which has been promoted as the means for investing in one or more specific investment trusts; or
    (2) buys, sells, surrenders, converts or cancels rights under, or suspends contributions to, a personal pension scheme or a stakeholder pension scheme; or
    (3) elects to make income withdrawals, an uncrystallised funds pension lump sum payment or purchase a short-term annuity; or
    (4) enters into a pension transfer, pension conversion or pension opt-out.

  • We write short reports every time somebody crystallises - no matter how little. We also write reports when clients draw income (lump-sum and regular) from their pension pots.

    There is normally quite a lot to consider - LTA (for PCLS), long-term fund sustainability, why draw pension funds and not take the money from somewhere else, do we need to sell investments in the pension to fund a withdrawal and if so, what and why, etc.

  • According to Paradigm, 'continuation of advice' letters or even emails can be very quick and easy as long as they refer to the earlier advice. I believe you can have one full report recommending phased flexible withdrawal of PCLS then thereafter no report is required unless it's a new 'advice event'. Think about whether the letters and reports stack up as a series.

  • Clare, just be aware of the requirement for period assessments on Mifid II business, which are slightly more detailed (but easy to comply with). My post here has a bit more detail.

    Benjamin Fabi FPFS
    Chartered Financial Planner

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