Defined Benefit 

Surge in insistent clients demanding pension transfers

Surge in insistent clients demanding pension transfers

Financial advisers are concerned about an increase in insistent clients disagreeing with their recommendations on defined benefit (DB) pension transfers, research from Momentum Pensions shows.

According to the survey, which polled 102 advisers specialising in pensions planning, nearly two out of three advisers said their biggest concern about defined benefit business is the risk of future liabilities from advice that is contested.

Almost half of these professionals have seen an increase in insistent DB pension transfer clients over the past year, the research from the self-invested personal pension (Sipp) provider revealed.

DB transfers has been a matter of concern for the Financial Conduct Authority (FCA), which revealed last week that advice in more than half of the cases where the recommendation was to move the retirement pot was unsuitable or unclear.

At FTAdviser's Unpackaging Pensions event Caroline Mitchell, lead ombudsman at the Financial Ombudsman Service, urged advisers who deal with insistent clients to get these individuals to put their intention in writing and tape them.

This type of evidence can make sure insistent client complaints against an adviser are swiftly thrown out, she said.

Momentum's research also showed more than half (58 per cent) of the advisers polled would support legislation to stipulate which investment vehicles the DB funds can be transferred into, including capital protection and hedges against inflation and volatility.

Some 53 per cent of advisers said their biggest fear for consumers who transfer is that they are surrendering a guaranteed income for life, while 48 per cent worry that customers do not understand the investment risks of moving into defined contribution (DC) pensions.

Momentum believes the FCA focus on transfers means a ‘one size fits all’ approaches are no longer valid.

According to John McCreadie, head of sales at Momentum Pensions, advisers are facing “clients who are insistent on moving to benefit from relatively high transfer values and the perceived increased flexibility of Sipps and defined contribution schemes”.

He said: “Defined benefit schemes pensions offer valuable benefits and anyone transferring should be looking for choice and value from their investment selection, as well as full flexibility and a range of ways of accessing the solution.”

According to Alistair Cunningham, financial planning director at Surrey-based Wingate Financial Planning, advisers are right to be concerned about insistent clients.

He said: “Our very black and white view is to avoid clients who may be more likely to ignore recommendations, often because they do not have a clear set of objectives which could be met by other means.

“One of the ways we do this is to offer to bear the cost of an initial discussion to talk about their motivations. Death benefits would be a poor reason (to transfer) but being in very poor health may not be.”

maria.espadinha@ft.com

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