Defined Benefit  

Pension transfers down 40% in a year

Pension transfers down 40% in a year

The number of defined benefit pension transfers analysed by advisers and paraplanners using the Selectapension transfer tool has dropped 40.5 per cent in a year.

The investment and financial planning software firm registered 3,370 cases in July, which compared with 5,665 files analysed through its DB transfer tool in July last year.

The downward trend has been felt since the beginning of last year, when Selectapension registered 7,968 cases.

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At the same time the number of advisers using the tool remained more or less flat, recording only a 9 per cent drop year-on-year.

Peter Bradshaw, director at Selectapension, told FTAdviser the software firm has 70 firms registered for its report writing service, and that has remained constant during this period.

The cost of professional indemnity insurance alongside some firms withdrawing from the DB market were some of the reasons for the decrease in Selectapension’s case numbers, Mr Bradshaw said.

FTAdviser previously reported that financial advisers involved in the British Steel pension transfer scandal have been struggling with PI cover, after some insurers introduced a blanket exclusion on steelworker transfers in new policies.

The issue started to affect the whole DB advice market after the Financial Ombudsman Service award limit was increased from £150,000 to £350,000 in April, accompanied by a forecast that premiums could rise by 500 per cent as a result in a "worst-case" scenario. 

Since then some advisers have seen their PI premiums increase exponentially, with the Personal Finance Society confirming recently that one adviser had seen the cost of his insurance rise from £6,700 to £27,000. 

Despite the drop in the number of cases, Mr Bradshaw said the market would continue to be important for the firm, which recently invested in new features for its DB transfer tool.

He said: “It has slowed down, there is no question about that, for reasons that we all know, but I do think it has probably plateaued now. I don't think the demand for DB transfer advice will evaporate any time soon.”

He is expecting, however, an increase in the number of advisers using Selectapension’s tool, after CashCalc announced it is withdrawing its transfer value comparator tool due to low demand amid a shrinking market.

Mr Bradshaw concluded: “Unless the users are withdrawing from the market they will have to go somewhere else. I would expect an increase in demand for our tool.”

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