Industry branded 'deluded' over DB to DC switch

Industry branded 'deluded' over DB to DC switch

The financial planning sector has been described as "deluded" for thinking that it will cope with retirement planning after transferring clients out of defined benefit schemes.

Veteran financial services advertising copywriter and marketer, Lucian Camp, made the remarks at the Momentum UK Financial Wellness Roundtable, where he described a "collective delusion" among the financial services industry about the move to DC.

He said clients had effectively gone from "buying package holidays to having to design and build the planes to take them there", largely as those moving from defined benefit to defined contribution pension schemes had to take a more hands-on role with their retirement planning, often without the necessary support.

Defined benefit transfers are regularly topping 40 times the value of their annual entitlement, making them many members' most valuable asset, according to Drewberry Wealth.

Currently, DB members with a pot worth less than £30,000 do not need to take financial advice. Only those with a pot worth more than £30,000 must seek advice from a specially-qualified adviser.

An unprecedented surge in demand for transfer value analysis (TVAS) reports has prompted Scottish Widows to launch a defined benefit transfer guidance service for advisers.

In the first quarter of 2017, the Lloyds-owned life company saw the number of requests for its TVAS report service increase by 170 per cent.

Samantha Seaton, managing director of Momentum UK, said the industry needs to do more to help people in their decision making.

“IFAs and industry stakeholders need to regularly sit down and agree on the best way to keep moving forward as in industry," she said.

"This may involve better utilising technology and tools to make financial advice more accessible to the mass market.”

Amid a  many IFAs are giving to clients about a switch from DB to DC.

Philip Church, adviser at Glasgow-based Pension Investment Management, said: "We are very cautious of moving people or advising people to move from DB to DC. People look for safeguards when they enter retirement, as they are unable to earn their way out of things if they overspend in the early years."

He added that some advisers looking for funds under management might use that as an excuse to encourage switches from DB to DC.