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Pensions transfers:
are your members receiving quality advice?

Our viewpoint

Can Trustees be satisfied with the quality of advice members receive in relation to pensions transfers?

The number of people transferring out of defined benefit (DB) pension schemes seems to be levelling off at last, as reported by LCP’s latest quarterly transfer survey. The numbers of transfer quotations requested is still high compared to pre-2015 (beforethe new pensions freedoms were introduced) and the quality of financial advice continues to remain patchy. In fact, the FCA reported that less than 50% of DB transfer advice in its most recent review was deemed ‘suitable’.

Caroline Rookes’ separate review of the British Steel Pension Scheme transfer concluded (amongst other things) that it would have been useful for members to have had access to a panel of financial advice firms that they could have selected from. Instead, some workers were ‘factory-gated’ by unscrupulous introducers; others were merely directed to adviser directory unbiased.co.uk (wording still in use in many trustees' communications today), which Rookes described as ‘anything but unbiased’.

So, what should we be doing instead?

It is clear that the quality of pensions transfer advice offered by some financial advisers remains below required standards with many still incentivised to recommend transfers out by ‘contingent fee structures’ which trigger substantial additional fees if a client does decide to transfer out. 

We are promised more guidance from the Pensions Regulator in this area. Until then, trustees and employers alike should consider ‘getting on the front foot’ and appointing a good quality IFA to provide education and advice to members considering their pension options. 

LCP has already helped many clients to appoint pension specialist IFAs who have robust processes and who are not incentivised to advise members to transfer out. Members and clients alike tell us that they have seen a step change in members’ understanding of the issues – which can only be a good thing for all involved.