Defined Benefit  

Partial pension transfers pushed as solution

Partial pension transfers pushed as solution

Financial advice company Wealth at Work has claimed more defined benefit schemes should consider offering partial transfers as part of their duty of care to members.

The Financial Conduct Authority's review of the quality of pension transfer advice given to members found less than half (48 per cent) of the advice given was suitable, meaning that most of these pension transfers shouldn’t have gone ahead.

Jonathan Watts-Lay, director of Wealth at Work, said offering partial transfers can be an efficient way for schemes to manage liabilities and can also help members avoid the cliff edge of total transfer or no transfer.

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He said: "At the moment only about 15 per cent of schemes offer it but there is certainly an appetite for this.

"In fact, we carried out a poll during a recent trustee and employer event which found that 85 per cent of respondents thought that all DB schemes should allow partial transfers.

"There is a duty of care to have a robust process in place to help members and employees understand the benefits and risks around pension transfers, as well as other risks faced at-retirement such as falling for a scam, buying inappropriate retirement products, paying more tax than necessary and ultimately running out of money."

This month figures from LCP showed the take-up rate of defined benefit (DB) transfers has remained steady at 30 per cent, despite the number of people requesting a quote declining.

The consultancy firm, which provides quarterly analysis on DB transfers in the 78 schemes for which it provides pensions administration services, stated quotation rates have fallen to about 6 per cent of deferred members in 2018, compared with almost 8 per cent in 2017.

But despite the decline, which was already felt in the previous quarter, the number of people going ahead with a transfer has remained stable at 30 per cent in the 12 months to the end of June 2018.

This compares with 28 per cent in the previous 12 months, LCP stated.