Defined benefit pension transfers should not be about “crunching the numbers”, but understanding the client, Richard Parkin has said.
The head of retirement at Fidelity Worldwide Investment said there had been a rise in DB to defined contribution transfers since the pension freedoms came in, but he warned that such transfers should not be carried out just because the client requests it.
He said: “DB transfer advice is not just about crunching numbers to see if a transfer makes sense. It’s about getting a full understanding of what a client is trying to achieve and assessing whether a transfer is the most effective way of delivering this.
“Often a transfer is not the best route, but we can still meet the client’s needs. For example, those looking to increase benefits on death may be better advised keeping the defined benefit pension and using payments to fund additional life insurance. Similarly, those wanting to release additional cash may be better advised to increase borrowing and use pension payments to service the debt.”
His comments came as a growing number of advisers have warned about the lack of transparency among some advisory firms for giving advice on pension transfers.
Mr Parkin confirmed that Fidelity charges a flat £2,500 fee for DB transfer advice. Typically, it asks clients to pay £500 up front with the balance payable on delivery of the advice.
Background
Over the past few weeks, advisers such as Paula Steele, managing partner of John Lamb Financial Planning, based in London, and independent pensions adviser Alan Higham, warned there was a lack of transparency over charges on DB to DC pensions advice.