Personal Pension  

Providers question mandatory advice for DC transfers

Providers question mandatory advice for DC transfers

Standard Life and Aviva have agreed those with pension pots of more than £30,000 who want to transfer between defined contribution schemes should be given more help, but questioned whether advice should be made mandatory.

Under current Financial Conduct Authority rules, advisers must carry out a transfer value analysis to review the benefits being given up from a defined benefit pension scheme with those that could be offered by a personal pension scheme.

Following pension freedoms there have been calls from some in the industry for this rule to stretch to transfer value analysis by advisers for defined contribution pension scheme transfers too.

Article continues after advert

John Lawson, head of policy for retirement solutions at Aviva said he did not think mandatory advice on defined contribution transfers is necessary, but called for more consumer information on charges.

He said many defined contribution pensions offer similar fund choices to each other so the primary reason for most transfers would be cost. “What you are really looking at these days is probably charges.”

Alan Ritchie, head of employer and trustee proposition at Standard Life, said consumers also need more information on how much they withdraw from their pension, the investment choice faced, and tax implications.

But added “I don’t think that always has to be advice.” Robo-guidance could assist some individuals, he said.

At the start of 2015 the Financial Conduct Authority outlined pension providers must act as a ‘second line of defence’ for consumers seeking to take advantage of pension freedoms, asking clients questions about their circumstances, give relevant risk warnings, and refer to guidance services or regulated advice.

But Andrew Pennie, marketing director at Intelligent Pensions, said less than 12 months into the pension freedoms there is evidence the communication around retirement income options are not working effectively enough, and some defined contribution scheme members risk making the wrong decision.