DB transfer take-up rates reach new high as transfer
activity concerns continue to hit headlines
Concerns over the quality of advice in relation to DB pension transfers have hit the headlines again, most notably around concerns over how members of the British Steel Pension Scheme were targeted by unscrupulous advisers and unregulated introducers.
At the same time, LCP’s latest quarterly transfer activity analysis report shows that, while there has been a small drop off in the number of DB transfer quotations being requested, take-up rates have reached a new high with over a third being paid out for the first time.
When the new pension freedoms were introduced in 2015 many pensions professionals anticipated that there would be a significant increase in transfers from DB pension schemes. The then Pensions Minister Steve Webb suggested we may see more pensioners driving round in Lamborghinis, indeed Lamborghini announced that the UK was its third biggest market in 2017; coincidence I am sure.
It is clear that the new freedoms offer opportunities to members in terms of managing their retirement cash to better suit their circumstances but I am sure that many of those working in pensions in the 1990s and early 2000s will also have seen the potential for another pensions mis-selling scandal when the new freedoms were announced.
Although protection for members is better than it was back in the 1980s and 1990s and the FCA has recently maintained its stance that “an adviser should start from the assumption that a transfer will be unsuitable”, I was interested to see that the FSCS recently announced its 2018/19 levy is 20% higher than anticipated due to the level of claims against DB transfer advice it is expecting in the next 12 months.
Transfer activity was also highlighted as one of the Pensions Regulator’s concerns in its 2018 annual funding statement. The Regulator is rightly concerned that members may be making irrevocable decisions about their retirement income without having access to robust financial advice that is appropriate to their own personal circumstances. The Regulator indicated that it expects trustees to monitor transfer activity closely and report any concerns to the Regulator or FCA; so for the time being this should be an agenda item for every trustees’ meeting.
Read more on our latest transfer activity analysis.
- Next newsletter: All change for DB transfers - Issue 11
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