Pension Transfers Suspended For Firm

Pension Transfers Suspended For Firm.

We have arranged a number of pension transfers over the last couple of years and many clients are dismayed at the complexity of the advice that is required, a transfer value actuarial analysis and untimately the ‘good, the bad and the ugly’ of the potential results in the future needing to be discussed and explained before we can even agree to contemplate the transfer or not.

The demand for ‘Defined Benefit’ or Final Salary/Career Average Salary transfers and ‘Safeguarded Rights Pensions’ to flexible pensions is high given the flexibility, the potential early death benefits and extremely high transfer values, yet the regulations that we must negotiate in order to get to the ‘best consumer outcome’ for you make this the highest risk area of advice that a financial adviser can be involved in.

This week, a Scotland based pension transfer adviser has been told to suspend its defined benefit transfer business owing to compliance concerns.  The firm in question had completed around 10,000 such pension transfers and it is right for the Financial Conduct Authority to oversee that consumer outcomes are good.

In another development last week , a leading pension provider had decided not to get involved at all in these types of pension transfer.  In addition, last year, the Government banned ‘government service’ types of pensions such as NHS pensions, Teachers Pensions, Fire Service Pensions etc being transferred outright.  They are banned!

We are still allowed to advise on Defined Benefit Transfers.

This firm will continue to offer advice in this area, but we repeat our message, this is a two stage advice process.  Stage 1 is the feasibility of whether the transfer should take place or not, including ‘hard facts’ such as charges, yields, loss of guaranteed pension rights, inflation protection, annuity rate protection, investment loss protection, schemes in defecit, government changes the law to allow schemes in difficulty to reduce pension benefits as well as ‘soft facts’ such as longevity, blood line, other pensions, abiliity to survive with other income resources in retirement, debt/asset position, future life plans as well as any other overriding reason as to why you need to transfer.  It cannot simply be, it’s a lot of money that I want in the my own name.

Equally, we must also balance the fact that some defined benefit schemes may not have great death benefits or you may not have a spouse that woould benefit from any surviving spouse pension.  What if we do not transfer a scheme and then you pass away prematurely?  Your loved ones could have inherited a pension pot if you had transferred, but by remaining on the scheme, with no spouse, your pension benefit is then a windfall for the pension scheme.

If, after all of this, it is agreed that a transfer is in your best interests, it is only then that we will advise to transfer and move to Stage 2 of the advice i.e. to transfer.

Like we say above, the highest and most complex area of advice that we are involved in and we call upon the regulator to offer greater guidance.