Hargreaves Lansdown has decided not to revive its defined benefit pensions transfer operations, after temporarily closing the service last year, FTAdviser can reveal.
When the firm put the service on hold in August 2015 in response to an inundation of transfer requests post-pension freedoms, it said it would accept “new cases again in a matter of days and weeks, rather than weeks or months”.
But 10 months on, head of communications Danny Cox confirmed Hargreaves Lansdown had not revived the service, except in extreme cases when a client is in very poor health.
“When a client asks us whether they should transfer out of a DB scheme, the trouble is most of the time the answer is ‘no you shouldn’t,’” he said.
Previously, the firm had refused to execute transfers for “insistent clients” – those that were advised not to transfer, but opted to anyway – however Mr Cox said turning away clients on this basis was not good for the business, because it essentially meant clients were paying to be told to do nothing.
“We simply say at the outset that we will only accept transfers in these special cases,” he told FTAdviser. But despite this policy, he added the firm had still seen a “big increase” in transfer requests since pension freedoms came into force in April 2015.
Hargreaves Lansdown is not alone in this stance, with DB transfer specialist advisers across the board reporting a surge in requests since last year’s at-retirement reforms.
This week, FTAdviser reported Intelligent Pensions had seen requests increase by fourteen times over the last two years.
Unlike Hargreaves Lansdown, though, it said almost 90 per cent of the requests it received were approved.
Old Mutual Wealth, which provides a specialist final salary transfer analysis service to advisers, stated analysis requests had more than doubled.
However, the company’s retirement planning expert Adrian Walker said most come back negative.
“In the vast majority of cases, from what we see, the transfers are not proceeded with,” he said, adding that approximately one in eight are executed.
Old Mutual Wealth does not turn away transfers from insistent clients though, pointing out this is a matter for the adviser, not the product provider, to decide.
Mr Walker said the main incentive to transfer out of a DB scheme post-pension freedoms was to access the death benefits, something particularly the case for people without spouses or partners, who stood to gain nothing from spousal provisions in the schemes.
“If I’m single and I die, my DB pension dies with me. You can’t pass it on.”
He said the new laws, however, allow people to pass on a drawdown pension to any beneficiary. If the individual dies before 75, Mr Walker added that meant the beneficiary, regardless of age, could continue to draw down on the pension tax free.