When you move your pension to an AJ Bell Youinvest SIPP, we’ll reward you with between £100 and £2,000 cashback to say thank you.

The more you transfer, the more you’ll get.

T&Cs apply. Capital at risk. Check for benefit loss.

— AJ Bell Youinvest (@AJBellYouinvest) November 2, 2020

This advertisement appears to find money from nowhere, but that is not the case. The “cashback” from transferring into an AJ Bell SIPP is money that has been taken out of your pension pot and it is effectively a kind of pension liberation.

Incentivizing people to transact using cashback is nothing knew, Steve Webb christened the practice “sexy-cash” when Boots paid members of its pension schemes a cash incentive to give up valuable features of their defined benefit promise. Part of the problem that the then Pension Minister uncovered was that people were being incentivized from a pension pot that had been subsidized by the tax-payer to pay pensions – not give them up.

Now we have a reputable SIPP provider giving its policyholders the right to additional tax-free cash so long as they bring money to their AJ Bell SIPP. And just in time for Christmas too!

I can’t see how this is anything but “sexycash – the sequel” with the money available being a rebate of charges on the transfer from AJ Bell. Indeed, there is an alternative (but much less sexy offer on the table – being a rebate – into the SIPP – of costs incurred by the policyholder to rebate costs of transfer levied not by AJ Bell but the ceding provider. It’s an either/or offer but I doubt that many people will go for an enhancement of £500 into their SIPP when their entire Christmas could be paid for by the pension (and the tax-payer).

I am with “Lee”, though maybe not so anti-consolidation, just against the means to incentivise which puts short term “sexy-cash” before the longer term interests of providing a wage for life from the consolidation

I can’t believe that after all that’s happened a regulated SIPP company is still suggesting “consolidation” as a reason to move my pension. @henryhtapper @1966SJG

— Lee (@finspeak) November 29, 2020

In the non-advised world of exexution-only SIPPs it is all too easy to woo-investors away from low-cost and easily manageable workplace pensions into the highly sophisticated arrangements run by AJ Bell and others and if you were in your fourties and struggling to pay your bills, the simple route to pension liberation outlined in this advert might be precisely what was needed to meet a short-term cashflow need.

But there are people up and down Great Britain and all over the Continent currently paying punitive bills to HMRC for participating in illegal pension scams for precisely the same reason. The pension liberation schemes that came to market in the first decade of the 21st Century were appealing to the same instincts as the AJ Bell cashback offer.

I hope that someone at the FCA will have a quiet word in Andy Bell’s ear. While there is nothing illegal about cashback, it opens the door to abuse – with the scale of the cashback ramping up with the charges imposed on entry to the SIPP, while AJ Bell’s are reasonable, the next round of cashbacks might not be.

As with all the other sexy-cash schemes, it is far too easy to exploit a loophole , once the loophole has precedent. Let’s nip this potential abuse in the bud and stop the practice of cashback on pension transfers, before it takes off. We have been here before.

So where does the cashback come from? It seems like a novel form of enhancing tax-free cash to me!

— Henry Tapper (@henryhtapper) November 30, 2020