Intelligent Pensions has seen defined benefit pension transfer requests surge by more than 14 times over the last year, as members take advantage of the increased flexibility offered by the 2015 pension freedoms legislation.
Speaking to FTAdviser, Intelligent Pensions marketing director Andrew Pennie said in 2014 the company saw less than one transfer request a month.
That rose to four a month in 2015 – a figure he called “front heavy” because pension freedoms didn’t come in until April that year – and shot up to 14 a month in the first five months of 2016.
Mr Pennie put the increase solely down to the government’s pension freedom laws, which abolished compulsory annuitisation and gave pensioners the freedom to do what they wanted with their private pension pots.
He said he expected the number of transfers to increase further as the company became more pro-active in seeking new business.
“So far we’ve not been particularly pro-active in this area. Most of the new business has just come to us. But with more resources and staff dedicated to DB transfers, we expect the number to increase further,” he said.
He said Intelligent Pensions had responded to the increased demand by hiring an extra adviser dedicated to pension transfers, and increasing its marketing spend.
He said 10 per cent of pension transfer requests were refused.
Of the remaining 90 per cent, a third were initially refused, but after further consultation Intelligent Pensions decided they were appropriate.
Mr Pennie said Intelligent Pensions did not facilitate DB transfers it had advised against via the “insistent client” rules.
“If our initial recommendation is that clients don’t transfer, and they still want to transfer, we think one of two things has happened,” he said. “Either the client hasn’t understood the advice or we haven’t understood what they’re trying to achieve.”
According to Mr Pennie, the most commonly cited reason for transferring out of a DB scheme was the superior death benefits, particularly for people without a spouse.
Other reasons included poor health resulting in reduced life expectancy, the need to pay debts and the desire for more flexibility.
No one was cashing out their entire lump sum, he said.
Mr Pennie said the whole process could take three or four months, adding the DB schemes themselves were struggling with the increased demand.
“This is a new one for them, and they haven’t got anyone allocating additional resources to deal with it,” he said.
However, he said, done properly, many DB schemes would view transfers as a positive thing. “I suspect a number of companies will look to get rid of members over the next couple of years.”
He said the bad press surrounding the DB sector – particularly regarding the BHS and Tata Steel schemes – could motivate more members to transfer out. However, he said there was “no reason to panic yet”.
Intelligent Pensions is not the only firm to report increased interest in DB transfers. In April adviser software provider Selectapension said use of its DB software more than doubled in the 12 months following the introduction of pension freedoms.