Scottish WidowsApr 3 2017

Scottish Widows launches DB transfer guidance service

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Scottish Widows launches DB transfer guidance service

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.

The provider said the month of March had seen more requests for TVAS reports than any other month since the service was launched.

To meet this demand, Scottish Widows announced it had created a "digital toolkit" to help advisers meet the growing demand for defined benefit transfers.

The free service, which has already gone live, provides information to advisers and their client on what to look at when considering a defined benefit transfer.

It includes guides, checklists, case studies, and a link to Scottish Widows' TVAS report service.

In launching the toolkit, the provider is following the likes of Prudential and Novia.

Novia recently launched its own TVAS report service, while Prudential announced it was setting up its DB advice business, both in response to demand.

Ronnie Taylor, director of distribution at Scottish Widows, said the surge in demand for DB transfer support had been "staggering".

"The increased interest has been mainly from people looking to access their funds flexibly, the ability to pass on funds to beneficiaries, and of course continued financial market conditions meaning transfer values for many in a defined benefit scheme are higher than ever before," he said.

"But moving out of a defined benefit scheme may not be the right option for everyone, so we’ve used our in-house technical expertise to create a digital toolkit for advisers, available free of charge, so they have expert advice at their fingertips for their clients."

Advisers and product providers put the surge in demand for DB transfers down to two factors: pension freedoms - in particular the inheritance tax advantages of a defined contribution pension - and sky high transfer values.

The latter are a result of low gilt yields, which plunged to record lows following the Brexit vote last June.

But despite this change in circumstances, many advisers remain reluctant to offer advice on DB transfers, claiming the risk of complaints is too great.

There have been calls for the Financial Conduct Authority to alter its position that DB transfers are usually a bad idea, as well as to rethink its focus on critical yield, to bring the regulatory regime in line with pension freedoms.

But in a recent piece of guidance, the regulator appeared to tighten its stance on DB transfer advice, stating it believed a number of firms were providing sub-standard advice.

Old Mutual Wealth's Jon Greer recently argued there may be grounds for complaints if clients discover they would have been better off transferring out - which he said was a particular risk when transfer values are high as they currently are.

Susan Hill, a chartered financial planner at Susan Hill Financial Planning, said it was "dangerous" to advise someone to stay put - especially in writing - as there was not precedent for what would happen if the client complained.

She added she doubted whether her professional indemnity insurance would cover any related claims.

james.fernyhough@ft.com