Transferring a SIPP to a different provider

Transferring a SIPP to a different provider sounds straightforward. You have a pension, you want to move it, and you expect the process to take a few weeks. For many people, though, what should be a simple process turns into something far more complex.

Not because of the law, but because of the way providers and financial advisors operate. This article explains why that happens, using a real case study to show exactly where the process breaks down.

Do you legally need financial advice when transferring a SIPP to a different provider?

In most cases, no. If you are transferring a defined contribution SIPP, where your pot grows through contributions and investment returns, the law does not require you to take financial advice. The mandatory advice rule applies only to defined benefit pensions worth more than £30,000, or pensions that carry safeguarded benefits such as guaranteed annuity rates.

So if you have a standard SIPP and want to move it to another provider, you are under no legal obligation to speak to an advisor first. Nevertheless, many people find that their provider insists on it anyway.

Why providers demand advice before transferring a SIPP to a different provider

Providers have faced considerable regulatory scrutiny over pension transfers in recent years. The Financial Ombudsman upholds a high proportion of pension transfer complaints, and the FCA has made clear that providers bear responsibility if a transfer later causes harm.

As a result, many providers now operate a blanket policy requiring financial advice before they action any transfer to a different provider, regardless of whether the law demands it. For anyone thinking about transferring a SIPP, this policy creates an immediate problem.

This transfers the liability to the advisor. It also transfers the problem to the customer, making transferring a SIPP to a different provider more difficult than many people expect.

A real example: the chain of blockages

Here is a real case that shows exactly how this happens. A client aged 80 held a SIPP worth £200,000 with AJ Bell. He wanted to access his 25% tax-free cash, which is a legal entitlement, and had also been considering transferring a SIPP to a different provider, specifically Interactive Investor. He was married with children, owned property, and also wanted advice about inheritance tax planning.

AJ Bell required financial advice before they would allow him to access his tax-free cash. That requirement brought him to us.

However, when the advisor looked at the Interactive Investor option, a second problem emerged. Interactive Investor does not accept advisor charges, meaning there was no mechanism for the advisor to be paid.

Despite running their own SIPP, Interactive Investor sits outside the advisor-charging model entirely. As a result, the client found himself caught between two commercial realities.

His existing provider would not act without advice. His preferred new provider could not accommodate an advisor.

As a result, his options were limited to what the advisor could offer, or staying within AJ Bell.

What the financial advisor could offer

Our advisor met with the client via video and handled the situation very well. He identified 3 alternative SIPP providers and discussed the associated fees, which ranged from 1.5% to 2%.

On a £200,000 pot, that works out at between £3,000 and £4,000, simply to access money the client already had a legal right to. This is what transferring a SIPP can cost when a provider insists on advice.

Furthermore, due to the restricted nature of restricted advice, his options were limited to a small panel of providers. That panel is unlikely to include self-managed SIPPs, because there is no ongoing revenue in them for the advisor.

As a result, the advisor often steers the client towards a managed SIPP not because it is the right choice, but because it is the only option they can offer. It is also worth noting that the advisor did not make clear to the client whether the 3 providers offered were managed SIPPs or not.

Why advisor liability changes everything

This is the crux of the problem. When an advisor recommends a SIPP transfer and something goes wrong, the client can hold them liable.

Clients can bring a complaint to the Financial Ombudsman Service (FOS), and the numbers are not comfortable reading for advisors. In 2023/2024, there were 1,698 new SIPP complaints at FOS, with an average uphold rate of 57.6%, significantly higher than the FOS average across all product types.

To succeed in a claim, the client needs to show the advisor owed them a duty of care, breached that duty, and that the breach caused a financial loss. In practice, recommending a SIPP transfer to a different provider without thorough suitability checks is one of the most common grounds for a negligence claim against a financial advisor.

Maintaining professional indemnity insurance is not straightforward for any financial advisor. One upheld complaint can change their premium, their cover, or their ability to trade entirely.

That reality shapes everything about transferring a SIPP to a different provider. Restricted advisors have no choice but to work from a small panel. Independent advisors can access the whole market, but many limit themselves to a handful of providers for the same reason.

It explains the insistence on ongoing management and the reluctance to take on transfer only cases. When an advisor sits across from a client, they are not just thinking about what is right for that person.

They are thinking about what happens if it goes wrong.

The resolution and what it reveals

After the meeting, the client spoke directly to AJ Bell. It emerged that he may be able to move his SIPP internally to YouInvest, AJ Bell's self-managed platform, where he could access his funds without transferring a SIPP at all.

He was waiting to confirm whether that option was available and whether the charges were acceptable. After all the regulatory blockages, fee negotiations, and platform incompatibility, the client looked set to stay exactly where he started.

That is the real problem. An 80-year-old with a straightforward request to access his own tax-free cash went through a process that exists not to protect him, but to protect the commercial and regulatory interests of the organisations involved.

What to check before transferring a SIPP to a different provider

Before you start transferring a SIPP, check these 4 things:

• Does your current provider require advice? Ask them directly and ask why. If your SIPP is a standard defined contribution plan with no guaranteed benefits, the law does not require you to take advice before transferring.
• Does your new provider accept advisor charges? Not all do. If they do not, no advisor can facilitate the transfer there, even if you are willing to pay for advice.
• Is there an internal option? Some providers offer a self-managed platform alongside their advised service. Moving internally may remove the advice requirement altogether.
• What will advice cost? If you cannot avoid taking advice, ask for written confirmation of the fee before committing. On larger pots, percentage-based charges add up quickly.

Getting help

If you are looking at transferring a SIPP to a different provider and have come up against a brick wall, a financial advisor can help you understand your options, including whether advice is genuinely required in your situation. Some advisors will tell you that you do not need them. That is the one worth speaking to.

Find a financial advisor who specialises in pension transfers.