Tony Hazell 

Flexibility can help to bend DB transfer rules

Tony Hazell

Tony Hazell

Partial transfers of defined benefit pensions should be a no brainer. There are without doubt people who have built up substantial DB pensions who could benefit from greater flexibility.

But what to the investor seems a simple transaction is fraught with difficulty for both the pension scheme and the adviser.

I can see a host of scenarios where releasing some of a defined benefit (DB) pension might make sense. For example, a widower may wish to pass on some cash to his children to help them buy homes.

For those carrying a heavy debt burden, or with health problems or who maybe want to splash more than their tax-free lump sum will allow, extra flexibility is important.

I can seen a host of scenarios where releasing some of a DB pension might make sense.

I can see far fewer situations where cashing in the whole of the DB will unquestionably be of benefit. Standard Life is the latest company to call for the consideration of partial transfers to be embedded in the advice process.

It argues that this could lead to more people taking a mid-route rather than the current all-or-nothing transfer. But the obstacle remains that the final decision on partial exits is down to scheme trustees and rules.

As scheme managers have pointed out, partial transfers can be complex, especially when dealing with the guaranteed minimum pension.

Therefore, it is up to the government. If partial transfers are to become more widespread then it will require decisions to be made on the liabilities and responsibilities of the schemes.

Consideration would have to be given to how such exits can be achieved without impacting negatively on the scheme.

We have already moved from the scenario where DB is always right and DC always wrong.I still adhere to the view that DB is mostly right. I wouldn’t dream of giving up my DB pension unless the bribe were absolutely massive – about 50 times my annual pension might do it in order to cope with the lost benefits and tax implications. 

But the fact remains that for some people the flexibility to transfer part of their pension might make all the difference to their comfort and lifestyle in retirement. And if good customer outcomes are the goal of financial advisers then you should be in favour of more flexibility no matter what the hurdles or difficulties are.

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Stop the bank sharks

When I was editor of Money Mail we ran an investigation that highlighted how unarranged overdrafts could be far more expensive than payday loans.

Our findings angered the banks and shocked our readers, but there was no doubt – these one-time bastions of the high street were fleecing customers in a way that even backstreet loan shops couldn’t match.

We campaigned on these charges, which often seemed to target the least savvy and poorest customers. Regulators did little to help at the time, but the banks promised changes and some reforms did arrive.

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