Crunch as 60% of bosses say staff can't get pension advice

Crunch as 60% of bosses say staff can't get pension advice

Six out of ten employers are reporting that their defined benefit (DB) scheme members are having difficulties in finding financial advisers prepared to advise on pension transfer, data from the Association of Consulting Actuaries (ACA) shows.

The survey, which polled 466 employers, also revealed that only one in four transfer requests are being completed.

DB transfers have 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.

Under the rules introduced with pension freedoms in 2015, savers with a DB pension pot higher than £30,000 are obligated to seek regulated financial advice.

According to Bob Scott, ACA’s chairman, there are concerns about “both the availability and appropriateness of the regulated advice available to DB scheme members”.

Research from Financial Conduct Authority (FCA) published earlier this month showed that advice in more than half of the DB transfers where the recommendation was to move the retirement pot was unsuitable or unclear.

Mr Scott said: “This is disappointing but isn’t surprising.

“DB pensions are complex and varied and their value is not well understood. Comparing a DB pension to uncertain post-transfer investment returns and income choices is fiendishly complex.”

At the start of the year, the FCA expressed concern about the processes advice firms were using when recommending DB pension transfers.

The regulator published a paper on this matter in June, when it opened a consultation, which closed on 21 September.

A policy statement is expected to be published in the first quarter of 2018.

ACA’s report also showed that 47 per cent of scheme sponsors say that transfer requests now exceed 5 per cent of membership.

Alongside other freedom and choice costs, transfer value activity is adding between 10 to 20 per cent to scheme administration costs over previous years.

Mr Scott said: “Many schemes are additionally noting to our members that where IFAs are providing advice, the questions they pose during the transfer process are varied and time consuming.

“The quantum of enquiries and differences in approaches is posing difficulties for administrators and pushing up administration costs.”

According to Mr Scott, introducing standardisation in the questions asked by advisers to the schemes “would seem to be a sensible step,” and this “may be an area where the FCA could act swiftly to help all concerned”.

William Burrows, retirement director at Better Retirement, argued that “advisers are naturally cautious about taking on new DB transfer clients, but those who specialise in this area have tried and tested process which will have been agreed with their compliance departments”.

Mr Burrows said: “However, one consequence of the increased numbers of members looking for transfer adviser is advisers may be more selective about the members that will take on as clients.”

He argued that there are “probably enough advisers with the specialist qualifications, the problem may be finding them because for obvious reasons they may be shy about publicly advertising their services.”