Defined Benefit  

DB solvency fears driving transfers to DC

DB solvency fears driving transfers to DC

Advisers' client concerns about the future solvency of their defined benefit (DB) pensions schemes is adding to the demand for transfers into Sipps, according to Momentum Pensions. 

The Sipp providers poll of 107 advisers specialising in pensions found that nearly six out of 10 (57 per cent) believe clients concerns about future defined benefit scheme viability will increase this year, encouraging an acceleration of transfers into Sipps.

The survey also found that close to two-thirds (63 per cent) of advisers are concerned or very concerned about the on-going viability of some clients' DB schemes.

The research also confirmed the growing demand for transfer advice with more than half of advisers (55 per cent) in the nationwide survey having seen an increase in demand for DB transfers into Sipps this year.

John McCreadie, head of sales (UK) at Momentum Pensions, said advisers clearly believe that DB scheme viability is a major issue and so do their clients.

He said: “Recent industry figures valued DB pension liabilities held by small and medium-sized enterprises jumped 7.5 per cent to £4.3bn in 2016.  

"Low interest rates, increasing life expectancies and rising costs are headwinds for future final salary scheme solvency and are added concerns to retirement advisers and their clients.

“Market data indicates that around £50bn has been moved from DB schemes by a total of 210,000 members since April 2015.

"The growth in transfer advice is placing unprecedented demands on advisers who need unwavering support from Sipp providers to ensure the Sipp meets their clients’ future retirement needs.

"This means robust due diligence procedures, clarity on charges as well as the widest choice of investment options and deep technical support.”

Malcolm Mclean, senior consultant at Barnett Waddingham, said the general feeling in the pensions industry is there is no DB crisis and of course there is the lifeboat of the Pension Protection Fund.

Tom McPhail, head of policy at Hargreaves Lansdown, said: "The whole issue of DB transfers is all getting a bit febrile; there is a lot of money involved, clients are nervous and the industry is not slow to make the most of the demand for clarity.

"The FCA’s recent paper on DB pensions should help but I fear this feverish activity won’t abate any time soon."

stephanie.hawthorne@ft.com