When a client receives a transfer value (CETV) from their DB scheme, it will usually be guaranteed for three months. If the client comes to you for advice with less than a month of the deadline left, ask them why they left it so late. Perhaps they have already received advice elsewhere and did not like the answer? In any case, it is not your fault there is not much time left to obtain the DB scheme details and do the analysis. So do not be bounced into racing against the CETV deadline. It is more important to get the advice right than to hit the deadline. Either turn the case away, or make sure the client understands why the process cannot be rushed, that you are not promising to hit the deadline and that it is the client’s risk if their next CETV is lower.
Key Points
- The author outlines ten top tips for suitable DB pension transfer advice
- Advisers need to challenge the client's objectives for transferring
- A well edited suitability report is key to communicating your reasoning
4) Challenge the client’s objectives for transferring
In our experience, failure to do this is probably the most common reason why some advisers come unstuck with DB transfers. Your job is not to take the client’s reasons for transferring at face value, and write a suitability report to justify them in as convincing a fashion as you can. Your job is to assess those reasons against the client’s personal and financial circumstances, and their future plans and aspirations, and use your professional judgement to decide whether they make sense. How likely is it that the client will be in a position to take advantage of the ‘flexibility’ afforded by transferring out of the DB scheme? For example, if the client says he intends to leave the funds in his pension to his children after he dies, is this a credible objective supported by evidence that he will not need those funds to support his retirement income. Is there any reason to believe that this client has lower than average life expectancy?
5) Evidence client’s retirement plans do not rely on the DB scheme?
Is your recommendation to transfer based on the client having sufficient income and assets to support a comfortable lifestyle in retirement, so the secure income from the DB scheme is surplus to requirements? Make sure you have robust evidence and analysis to back up this assertion. Would it be clear to an independent third party, such as the FCA or Fos, how much retirement income can realistically be generated from these alternative sources, and that the client has bought into your analysis and made an informed decision?
