4 September 2020
The last five years have seen a surge in the number of people looking to transfer their pension rights from a Defined Benefit (DB) scheme to a Defined Contribution (DC) arrangement.
However, as the market has developed concerns have grown over the quality of some of the advice being given and the value for money being achieved by members post transfer. As a result FCA rules around transfer advice have been repeatedly tightened.
Against this backdrop and the upcoming FCA ban on contingent charging coming into force, this joint paper by Royal London and LCP brings new evidence to bear on what the future holds for DB transfer advice. It analyses the results of a survey of over 500 advisers on the issue.
The report provides case studies of two major pension schemes advised by LCP who have chosen to be proactive in supporting members in accessing affordable and high quality transfer advice.
Key findings include:
- Nearly half of advisers are unsure whether they will still be active in giving DB transfer advice in a year’s time
- Of those who had already given up advising on DB transfers, three quarters cited PI (professional indemnity) costs as a key issue
- Some advisers charging on a contingent basis were considering leaving the market when the FCA’s ban on this charging structure comes into force
- Advisers felt that FCA’s position on DB transfers was uncertain and some were fearful that a wholesale review of past cases was on the cards
- The DB transfer market is at a crucial juncture, with a real risk of pension scheme members finding it harder to source affordable and high quality advice