Selectapension has launched a tool to help financial advisers show clients if there is a simpler way to achieve their savings goals without transferring out their defined benefit (DB) pension.
The firm made headlines last November when it announced its pension transfer business, Selectapension Bureau Service, one of the UK's biggest DB transfer advisers and used by other firms to outsource their pension clients, would exit the market amid a backdrop of increased regulatory scrutiny of the sector.
In a bid to help those advisers still navigating the defined benefit transfer market, the pension and investment software part of the business will from today (12 February) offer an income modeller in its defined benefit and drawdown tools.
Selectapension said both versions of the tooll give advisers and paraplanners a more flexible and comprehensive way to model different retirement income scenarios for their clients, taking into account all pensions, assets and savings.
This may include Isas, collectives, bonds, annuities, state pension and other guaranteed incomes.
Peter Bradshaw, national accounts director at Selectapension, told FTAdviser launching this modeller is an opportunity for advisers and clients “to think twice, because some of the goals people want for their income could still be achieved without transferring” out of a DB scheme.
He said: “It's thinking beyond the short term and into the long term.”
DB transfers have been under intense scrutiny from the regulator following concern around the advice being given to retirees to exit lucrative pensions in high profile cases such as British Steel, which saw nine firms lose their pension transfer permissions.
The Financial Conduct Authority (FCA) announced last month that it will investigate all UK pension transfer advisers.
Pension advisers are increasingly worried about doing transfer business for fear of future costly claims they gave bad advice.
Mr Bradshaw said with his firm's tool advisers can set up a retirement income plan considering all variables, from which they are able to do regular and annual reviews.
He believes there is a high demand for such product. Around 400 financial advisers have preregistered themselves for a demonstration of the tool after launch, Mr Bradshaw said.
DB transfers has been the area of most activity for Selectapension, which is now solely focused on providing report writing analysis.
Mr Bradshaw said: “No surprise the biggest demand [on our service] has been for DB cases, we are processing about 50 to 60 cases a week.”
This trend is followed by figures – Selectapension had DB assets worth £6bn analysed through its tool in 2015, which jumped to £11bn in 2016 and to £35bn last year.
The software company will continue to focus its business in the report writing area, after exiting the DB transfer market in November.
The decision was made after CFP Management Limited, its main partner in this area, decided to leave this market.
Mr Bradshaw said:”One the unintended consequences of pension freedoms was the sheer volume of demand, and the CFP Management Limited just got totally overwhelmed with it. We don't want to do that anymore.”
The volume of DB 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 (DC) schemes in order to access their cash.
HM Revenue & Customs data showed more than £14bn has been unlocked from defined contribution pensions since pension freedoms came into effect.
Alan Chan, director and chartered financial planner at London-based IFS Wealth & Pensions, argued that it is “good to see this modeller being offered,” but he wouldn’t call it innovation.
He said: “I can’t see how it’s different from cashflow modelling software’s already available and, arguably, some are even more powerful and can cater for more holistic planning, such as Voyant or Truth.”
Mr Chan argued that “it’s inconceivable that any firm advising on DB transfers can go without cashflow modelling”.
He added: “I suppose the main benefit for those firms who currently use Selectapension for [transfer value analysis report] TVAS analysis can also do the cashflow modelling part with them for ease and consistency.”
maria.espadinha@ft.com
