The head of Aegon’s UK arm has expressed concern that advice businesses could be under threat if the regulator fails to clarify the pension transfer rules soon.
Adrian Grace, chief executive of Aegon UK, said the regulator has a history of changing the rules in terms of what is acceptable when selling products.
He said the jump in demand for defined benefit to defined contribution pension transfers was “inevitable” as people worry about the stability of the companies providing their final salary scheme, and look to make use of the pension freedoms.
The uptick in pension transfers means advisers have been doing more business on the Aegon platform.
According to its results, new business inflows on Aegon’s Arc platform reached a record £1.2bn during the first three months of 2017, which Mr Grace said was partly down to the pension freedoms increasing the need for advice.
Consumer confidence, he said, had proved resilient despite the uncertain political outlook, while pension freedoms has increased the need for financial advice, and increased enquiries about pension transfers.
I want to make sure there isn’t a second coming in terms of a rule change, which doesn’t help advisers in the long-term.Adrian GraceMr Grace said: “We need to make sure that the rules won’t change later down the line, before the tidal wave hits the market in terms of this shift to defined contribution schemes.
“We need to make sure we are all agreed on how the valuations and processes work.”
At the start of the year, the Financial Conduct Authority expressed concern about the processes advice firms were using when recommending defined benefit pension transfers.
Last month, the regulator revealed it would publish a consultation paper on DB transfers in "due course".
Mr Grace urged the regulator to “get on with it” because the flurry of pension transfers already being processed means advisers could risk being caught-out by a rule change later down the line.
“I just want to make sure that the regulator won’t turn the clock back and say that’s not how it should have been done,” he added.
Savers have to employ the services of a financial adviser to move their defined benefit schemes into defined contribution offerings if they have more than £30,000 in their pot, and the Aegon boss said he wanted to make sure advisers’ businesses were protected if they do this sort of business.
“We are an adviser-focused business, and I want to make sure there isn’t a second coming in terms of a rule change, which doesn’t help advisers in the long-term.”
Last month, Old Mutual Wealth pulled the plug on the contract with its original IT provider due to concerns that the overhaul of the platform would take too long.
Mr Grace stressed that the upgrade plan for Aegon’s newly-purchased Cofunds platform was on track, and that he was focused on sticking to the proposed IT provider.
He pointed out that Aegon’s plan differs from a traditional replatforming exercise because it will simply add functionality and data to the existing platform, rather than migrate customers to a new offering.
“Aegon is not starting with a blank sheet of paper. We’re pleased with our progress to date and we’re on track and on budget with the integration project.”
Commenting on the pension transfer consultation, Dan Elkington, IFA at Chattertons Solicitors, questioned whether a rule change would be necessary.
Under current rules, a pension transfer specialist needs to be involved in the case for a DB transfer to go ahead.
Mr Elkington said he wouldn’t want the regulator to reduce this standard because such action would potentially be dangerous.
He described the existing rules as “necessarily complicated”, but argued transfer value analysis (TVAS) is largely irrelevant.
“There are very specific circumstances at the moment which means the amount the trustees are offering for people to transfer out of DB schemes are pretty huge.
“This is a short-term thing, and if the gilt yields become healthier, then savers transferring from a final salary scheme will be much better off.”
The IFA therefore suggested transfer value analysis (TVAS) should be based on a worst-case scenario, similar to mortgage affordability, rather than being based on what the current market looks like.
katherine.denham@ft.com
