Financial advisers have backed the regulator's plan to create a template for information requests on defined benefit (DB) transfers but warn schemes still need the flexibility to answer more questions.
The Pensions Regulator (TPR) is currently working with financial advisers, providers and scheme administrators to draw up a template to be filled in by pension administrators when they are asked for a defined benefit transfer value.
This document should reduce the amount of information requests from advisers, and the time spent on the pension transfer process.
A defined benefit transfer has a time window of three months, after which the adviser will need to ask for a new quote, and might be charged for it.
Kusal Ariyawansa, a chartered financial planner at Manchester-based Appleton Gerrard, said this is a starting point.
He said: “With a standardised template, we can base our preliminary work on that. But they should be able to give us additional answers if we need so. They could not have a restriction and say that this is the only thing we are going to give.”
Mr Ariyawansa already tries to standardise the information request process from his side.
He said: “We have a standardised request, but the problem is that the answers to this varies from company to company, because they will not answer certain questions.”
The volume of defined benefit pension transfers has been soaring, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into defined contribution schemes in order to access them via the pension freedom rules.
Sam Caunt, director of Northampton-based Moerae Life Financial Planning, said even if the template covers all possible questions, the adviser still needs to “consider the information, look at other alternatives and cover off every possible solution”.
Even though Mr Caunt considers that a “standard pro forma enquiry form would be nice,” the real difficulty “remains trying to handle the subsequent transfer procedures and practices they [administrators feel they have to follow”.
He said: “I guess when you are about to hand over a seven figure sum you may feel you have to carry out checks against possible fraud, and whether the client has had advice from a regulated firm covered by the Financial Services Compensation Scheme, or that the receiving scheme is an authorised pension plan.”
However, he said “there is no need to ask the same questions over and over again and they should accept some responsibility,” such as looking up public information on the Financial Conduct Authority (FCA) register, he concluded.
According to Michael Owen, director of financial planning at London-based Brooks Macdonald, many “Defined benefit schemes already provide information in standard form rather than answers to specific questions”.
However, while three months to assess this information seems on the face of it a reasonable period of time, the time is quickly eaten up.
He said: “Advisers have to calculate (or outsource) the critical yield comparison, consider the recipient provider, consider a client’s risk profile, capacity for loss, meet a discretionary fund manager and agree a suitable strategy and then write a complex pension transfer report.”
Mr Owen's solution is for the client to request this “information from the scheme before meeting with an adviser”.
The regulator’s template is expected to be published next year, since The Pensions Regulator is working with the FCA on this initiative.
According to The Pensions Regulator spokesperson, this work is being developed alongside FCA’s consultation on DB transfers, which closes this month.
maria.espadinha@ft.com
