A majority of advisers have reported a rise in interest in defined benefit transfers, in further evidence of a a rush among savers to cash out post-pension freedoms.
In a survey of 107 advisers - 40 whom were DB transfer qualified - Retirement Advantage found that 40 per cent had seen a “significant” increase on the previous year.
Only 25 per cent of advisers said there had been no change since pension freedoms were introduced in April 2015.
The results of the survey came out a day after SimplyBiz reported a surge in interest in its outsourced DB transfer service, which is provided in partnership with Selectapension. Five hundred cases were referred to its service since it was launched in 2015, the firm said.
Andrew Tully, pensions technical director at Retirement Advantage, said that although DB transfers had “long been seen as a taboo”, pension freedoms had introduced “a number of factors which could indicate a transfer may be suitable”.
“The ability for family to inherit the remaining pension fund free of inheritance tax is a strong driver for some, compared to the often poor level of death benefits available for someone who has left their final salary scheme,” he said.
In a similar vein, people who are single have the ability to re-shape death benefits to suit their individual circumstances, he said.
“This is preferable to an irrelevant benefit automatically provided by the scheme. Final salary schemes also lack flexibility, so a transfer can give income flexibility and tax planning opportunities – allowing advisers to help customers control the amount of tax they pay.”
Tax-free cash rules and health issues were also valid reasons to transfer out, Mr Tully said.
He added that many schemes were currently offering transfer values higher than the historic average. As a result, he said advisers had been able to match the benefits from the final salary arrangement using an annuity with additional fund available in drawdown.
“This can be easily done through one product using new hybrid solutions, creating additional flexibility, better death benefits and tax planning opportunities compared to a final salary pension,” he said.
Corporate adviser and director of Corporate Benefits Consulting Allan Maxwell said recently a number of his corporate clients were offering enhanced transfer values in order to reduce their pension liabilities.
Xafinity reported last month that rock-bottom gilt yields have lifted DB transfers values to historic highs.
james.fernyhough@ft.com
