Defined Benefit  

Prudential to provide defined benefit transfer advice

Prudential to provide defined benefit transfer advice

Financial services giant Prudential has confirmed it will provide advice on defined benefit transfers, after receiving approval from the Financial Conduct Authority.

The announcement came in the midst of an unprecedented surge in demand for DB transfers, a result of pension freedoms and record transfer values.

It also came two weeks after the firm announced it was exiting the annuity market entirely.

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A spokesperson for Prudential said on Thursday (23 February): “Prudential Financial Planning has introduced a team to offer customers advice about transferring defined-benefit (DB) pensions following approval from the FCA in October 2016.

"The service is restricted to clients who hold deferred pensions and are close to taking their benefits."

Prudential already offers a transfer value analysis (TVAS) service, meaning the firm can now offer clients the full DB to defined contribution transfer service from transfer analysis to re-investment.

Earlier this month, Prudential pension expert Stan Hughes revealed the firm had seen an eightfold increase in the number of TVAS reports it completed - a rise he described as "quite staggering".

He said he had recently seen a transfer value worth 48 times the individual's annual pension.

Financial advisers and product providers across the board have reported massive increases in demand for DB transfers.

But despite this surge in interest, many advisers have been reluctant to provide DB transfer advice themselves, for fear of being liable for poor client outcomes.

The FCA has added to this fear by stating that transferring out of a DB scheme will leave most individuals worse off.

In January, the FCA fired a warning shot at advisers who it believed were providing substandard advice on DB transfers.

In particular, it said some advisers were relying on generic figures to determine whether or not a transfer was appropriate, rather than examining a clients specific circumstances.

Nevertheless, the industry has responded to the increased demand.

Platform provider Novia launched its own TVAS service earlier this month, in response to growing demand from advisers.

Novia chief executive Bill Vasilieff told FTAdviser that the conversion rate of its TVAS service - that is, the number of people who actually go ahead with the transfer - was significantly higher than expected.

He said they had expected 25 per cent to transfer, whereas the real figure was closer to 50 per cent.

Xafinity reported this week that transfer values had flattened out after a record surge post-Brexit. They are currently around 10 per cent higher than they were on 23 June.

Susan Hill, a chartered financial planner and director of Susan Hill Financial Planning, was sceptical of Prudential's move towards vertical integration.

"Is that not what we once referred to as a direct salesforce?" she said. "I left direct sales because in the RDR [Retail Distribution Review] world, advisers should be independent."

She also questioned whether customers of Prudential's DB transfer advice service would be offered an annuity, given Prudential was no longer offering annuities itself.