Pension trustees have said all schemes should offer partial transfers to give their customers more flexibility, a conference heard yesterday (4 October).
At XPS Pensions Group's annual conference, 75 per cent of trustees polled said there is a need for schemes to offer partial transfers whereby members can transfer part of their benefits and leave the rest in the scheme.
The poll of trustees came after last year FTAdviser revealed the Financial Conduct Authority and the Financial Ombudsman Service warned advisers they must find out whether pension schemes offer partial transfers when advising on defined benefit transfers.
Failing to do so could give the client grounds for a successful complaint, the ombudsman stated.
Partial transfers allow members to retain a portion of their guaranteed income in retirement, and cash in the rest.
They are popular with financial advisers, who have described them as "fantastic", "extremely beneficial", and a good way of accessing defined benefit cash without taking on all of the risks of a full transfer.
They can also serve to prevent wealthier members from exceeding the lifetime allowance.
Yet partial transfers are only offered by a small number of schemes.
Helen Ross, actuary and investment consultant at XPS Pensions Group, said: "Providing partial transfers is easy, but for some reason not all of schemes are doing it.
"People are given binary options between either security or flexibility and there is nothing in between. Providing partial transfers is beneficial for businesses too as it makes things simpler for consumers and it is cheaper to do in the long run."
FTAdviser reported earlier this year (23 March 2018) that only 15 per cent of schemes were offering partial pension transfers.
Data from the Office for National Statistics (ONS) revealed that funds transferred out of pension schemes reached a record £34.2bn in 2017.
Last year the FCA revealed that the advice in more than half of defined benefit (DB) pension transfers was unsuitable or unclear.
David Fairs, executive director for regulatory policy, analysis and advice at The Pensions Regulator (TPR), said: "There is a lot happening in the pension space with the Defined Benefit white paper, new Funding Code and the consideration of collective defined contribution schemes and DB consolidators, and the regulator is at the heart of it all.
"Our research has shown that pension scheme governance in pension schemes, most commonly small schemes, is not where we would like it to be.
"We are focussed on working with trustees to improve their service and communication to members by offering them the necessary tools to understand good practice.
"The Pensions Regulator wants to help pension scheme members to make sense of their options and ultimately make good decisions."
Last year LV published a report titled 'Why partial transfers should be a standard option', stressing the need for partial transfers among trustees, schemes and members.
LV argued in its report that trustees should make partial transfers a standard option for their members due to the mix of income security and flexibility this can offer.
rosie.quigley@ft.com
