Pension transfers and DB deficits: week in news

Pension transfers and DB deficits: week in news

Pension transfers, court cases and adviser moves were among the issues attracting attention over the last five days.

Here is your Friday afternoon round-up of the news stories you need to know about.

1) Pension transfer trouble

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This week’s Financial Adviser front page was perhaps indicative of the wider problem the industry is working through in terms of transferring pensions.

In this case, a Chartered financial planner accused Hargreaves Lansdown of trying to delay and dissuade clients from transferring pension benefits away - with the pension freedoms opening up a proverbial can of worms for providers.

A survey of professional indemnity insurers meanwhile found that defined benefit pension transfers were one of the main culprits for advisers not being offered renewal terms to advisers.

Julian Brincat, head of IFA practice at Protean Risk, admitted: “Underwriters are keeping a very close eye on DB transfers and how they are being conducted and a lot of firms are not prepared enough to be able to provide the relevant information to underwriters.”

Also this week, Tideway Investment Partners reported a massive increase in demand for final salary transfers, with managing partner James Baxter suggesting that as well as the at-retirement reforms, negative press around the sustainability of many DB schemes was driving the trend.

“Headlines on the BHS and Tata Steel pensions are undermining trust in the implicit final salary pension guarantees,” he commented.

2) DB deficits in focus

Just this morning, FTAdviser reported on a letter sent the British Steel Pension Scheme’s 130,000 members from its trustee chairman Allan Johnston, appealing for members to accept “modified benefits” to save the scheme’s sponsor, Tata Steel, and prevent the scheme falling into the Pension Protection Fund.

This came after former BHS owner Sir Philip Green hinted during a parliamentary select committee hearing that he would push for a similar compromise for the members of the BHS pension scheme, the deficit of which was a major reason for the closure of the company.

In the most high-profile grilling since Sports Direct owner Mike Ashley’s earlier this month, MPs also heard Mr Green claim he had no knowledge of the pension deficit until 2012.

Just last week, new figures revealed the size of the black hole, with the private DB sector now 80 per cent underfunded, prompting work and pensions committee chairman Frank Field to launch an inquiry looking for “radical solutions” to the problem.

3) High Courts questioned

The last few days also saw decisions made in the highest courts in the land called into question.

On Wednesday (15 June), a barrister questioned a High Court judgment made at the end of last year, throwing out a claim brought against Barclays by property investment business Thornbridge, over the sale of interest rate swaps.

Judge Moulder decided claims were brought with the benefit of hindsight following the financial crisis, with banks heralding the judgment as an important marker for mis-selling claims.