Doubts have been raised by Standard Life about whether the advice sector is ready for the large number of people who will need their services because of defined benefit transfers.
Speaking at the Marketforce Future of Life and Pensions conference in London yesterday (14 June), Jamie Jenkins, head of pensions strategy at Standard Life, said people considering transferring out of a defined benefit pension were very different to an adviser's typical client.
He compared the soaring number of people contemplating transferring out of a defined benefit pension scheme to lottery winners coming into a large sum of money.
Mr Jenkins said: “I think we have got a new group in it's tens of thousands if not hundreds of thousands soon, who have not gone through the grief of building their savings and don't have multiple products.
"They simply have a pension pot.”
Mr Jenkins added that if these people went into drawdown they would suddenly find themselves “in a world of investment” because they wanted flexibility, not because they actually wanted to be making decisions about the market.
He said: “I would say the advice profession as it currently stands, we have got 24,000 advisers, is well qualified and capable but deals with a far smaller number of wealthy clients, usually with a different history.
“I think it is emerging but with the sheer volume of transfers coming through there is not the capacity to deal with it, I don't think.”
A poll by Old Mutual International revealed advisers expect demand for defined benefit transfers to keep increasing in the next 12 months.
The survey of 210 financial advisers from across the UK, Europe, Middle East and Asia showed 42 per cent of them have seen an increase in demand for DB pension transfers in the last 12 months, and 35 per cent expect demand to continue to increase in the next 12 months.
UK advisers have experienced the biggest growth in demand, with 83 per cent saying they had seen an increase in the past 12 months while 54 per cent said they had seen a "significant increase" in demand.
Meanwhile 71 per cent of UK advisers are expecting demand to increase even further in the next 12 months.
Figures from The Pensions Regulator found that up to 80,000 defined benefit pension transfers were made in the year ending 31 March.
According to Xafinity's most recent figures, average transfer values now stand at around £241,000 for a pension worth £10,000 a year at age 65.
That is £30,000 more than the same pension was worth on 1 June 2016, before the UK voted to leave the European Union.
Transfer values have been hovering around that level now since January, after peaking at almost £245,000 in October.
There are mounting concerns among advisers about whether they could fall foul of the regulator or Financial Ombudsman Service if they advise on defined benefit transfers.
FTAdviser exclusively revealed earlier this week that the Financial Conduct Authority is currently carrying out a desk-based study into advice firms doing a “significant” amount of defined benefit transfer business.