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Moving investment platforms has never been easier. A few forms, a bit of patience, and your money arrives at its new home, usually with lower fees and a slicker app to show for it. For ISAs and general investment accounts, that’s more or less the whole story.
Pensions are different, and SIPPs that have already been drawn on are different again.
We’re currently helping a client who transferred his SIPP to a DIY platform after taking benefits at his previous provider. The transfer itself went smoothly. The problem has only surfaced now, months later, as we try to establish exactly how much of his Lump Sum Allowance he has left. The new platform holds his fund value. It does not hold the detail of what was crystallised, when, or how much allowance that used up. That information sits with the previous provider, and reconstructing it is proving considerably harder than it should be.
Why this happens
When you take pension benefits, the scheme is required to record what’s known as a benefit crystallisation event. Historically this was tracked as a percentage of the Lifetime Allowance. Since April 2024, that history has been converted into amounts used against the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance instead.
On transfer, the ceding scheme is legally required to pass this history to the new provider. In practice, particularly with execution-only transfers, what often moves is simply the crystallised and uncrystallised pot values, with the underlying benefit crystallisation event detail left behind. The receiving platform never asked for it, because a low-cost dealing platform isn’t set up to ask.
Why it matters later, not now
This is precisely why it goes unnoticed. There’s no cost at the point of transfer. The problems appear later, when they’re harder and more expensive to fix:
- Taking further tax-free cash without knowing your remaining allowance risks an unwitting tax charge, one that falls on the client, not the platform.
- Applying for a Transitional Tax-Free Amount Certificate, the mechanism for protecting a higher allowance where applicable, requires exactly this history. Without it, clients can end up defaulting to a less favourable calculation.
- On death, beneficiaries need this detail to establish what portion of lump sum death benefits is tax-free. That’s a difficult conversation to be having for the first time while grieving.
The CGT parallel, and where it differs
Anyone who has moved a share portfolio between platforms will recognise the shape of this problem. Missing acquisition costs and dates turn a straightforward disposal into a research project, sometimes years after the fact, sometimes without the option of simply asking the old provider.
The pension version is arguably less forgiving. A CGT record gap costs time, and occasionally an HMRC estimate. A missing crystallisation record can mean a tax charge that need never have arisen, or a permanently reduced allowance, because the certificate that would have protected it can no longer be obtained.
The practical point
If you’re considering moving a SIPP where any benefits have already been taken, whatever the reason, cost, choice, or convenience, request a full statement of benefit crystallisation events and allowance used from the existing provider before you transfer, not after. Keep it somewhere permanent. It costs nothing to ask for at the time. It can cost a great deal to reconstruct later, and in some cases, it can’t be reconstructed at all.
Platforms are very good at moving money. They are not always as good at moving history. For pensions, the history is often the part that matters most.
This is issued by IPS Capital LLP of 4 Eastcheap, London EC3M 1AE; a limited Liability Partnership registered in England OC328405 and authorised and regulated by the Financial Conduct Authority. It is issued in the UK only. This publication does not constitute advice and you should not make any investment decision based on it. The information contained herein is correct to the best of our knowledge and we may not be held liable for any errors or omissions. This information is based on current information in respect of UK Pensions. IPS Capital LLP does not offer tax advice and you should seek professional tax advice for your own circumstances.
