Tideway Investment Partners has reported a massive increase in demand for final salary transfers, in further evidence pension freedoms are encouraging retirees to ditch their defined benefit pensions.
James Baxter, the firm’s managing partner, told FTAdviser his firm was advising on around 40 defined benefit pension transfers a month, a figure that dwarfs the 10 to 12 transfers a year it saw before pension freedoms were introduced in 2015.
About 50 per cent of those transfers were referred to Tideway by other advice firms, who preferred not to advise on DB transfers themselves, Mr Baxter said.
He said Tideway now had 30 advice firms signed up to its DB transfer service, and was adding five or six new firms a month.
He said the average transfer value was about £450,000.
While pension freedoms were the main reason for the huge spike in interest, Mr Baxter said other elements were at play, in particular the negative press surrounding the sustainability of many company DB schemes.
“Headlines on the BHS and Tata Steel pensions are undermining trust in the implicit final salary pension guarantees,” he said.
The increased interest in DB transfers was demonstrated by the use of Tideway’s final salary transfer calculator, which is accessed through The Telegraph’s website.
Since it was launched in November 2014, it has been used by 110,000 people, with 11,000 of those users going on to download Tideway’s Guide to DB transfers, and 1,000 arranging a telephone consultation.
But despite this increase in demand, Mr Baxter said most advisers were opting not to offer transfers themselves, mainly because it was very difficult for small firms to get professional indemnity insurance.
“The PI market is very ugly. If you were doing under 20 transfers, most PI insurers would say no.” He said that was why most advisers were favouring outsourcing to third parties like Tideway.
Tideway is not the only DB transfer specialist to have recorded a massive increase in demand since pension freedoms.
Last week FTAdviser reported that Intelligent Pensions had seen a fourteenfold increase in transfers since April 2015.
But not all advice firms have followed Tideway and Intelligent Pensions in ramping up their DB transfer business.
Hargreaves Lansdown took the opposite route, closing its transfer service to all clients except those in very poor health.
The firm’s head of communications Danny Cox told FTAdviser that, as a large portion of transfer requests are denied, many clients end up paying a large sum of money to be told to do nothing. This, he said, was not good for business.
Mr Baxter claimed Tideway has got around this problem by adopting a three-tiered screening process consisting of its online calculator, its Guide to DB transfers and a telephone consultation, all of which he added “are free.”
Mr Baxter said by the time the client opts for the paid service, Tideway has established the transfer is appropriate.
james.fernyhough@ft.com
