More broadly, well-constructed advice on a transfer will also consider all of the member’s options at that point in time.
This makes transfer advice at or near the point of retirement particularly valuable for members who have a range of options, including taking a transfer.
This could include explaining the value of taking their DB pension benefits early, for example, or exercising other options in the scheme, like increasing the level of spouse’s pension.
The carve-outs for those in serious ill-health or those in serious financial difficulty will help a small minority of such members - the FCA estimates about 10 per cent - but most will not qualify.
Therefore, in my view, it is now time for scheme trustees and sponsoring employers to put in place a support framework for members wanting to see if a transfer is right for them or if another option is more appropriate.
A well thought through support framework can do this.
The risk of doing something is less than the risk of doing nothing and the reasons are threefold:
- reducing the chance of the member receiving bad advice by carrying out due diligence and partnering with a trusted adviser;
- protecting members from falling prey to scammers;
- and providing members with access to advice that they might not otherwise been able to find.
There is already movement in this direction. For example the Tesco Pension Scheme announced that it was partnering with two firms of advisers to give its members access to trusted transfer advice.
From the trustee and scheme sponsor viewpoint, a transfer support framework can encompass more than partnering with a firm of advisers; it can also include the provision of education tools for members and the streamlined provision of scheme information for the Appropriate Pension Transfer Analysis and Transfer Value Comparator calculations.
The numbers of members in scope will probably be the main driver of how extensive the support framework is.
From the adviser viewpoint, there are several advantages to partnering with schemes in this way aside from the obvious one of a steady stream of members to advise and the income streams associated with that.
Work done up front to provide standardised scheme information for each member results in big economies of scale.
For members who are also still employees, it is also an excellent way for the adviser to understand the wider circumstances related to the member’s employment, including any access the member has to a workplace pension scheme – an area of significant focus on PS20/6.
In fact, an arrangement of this sort, can help the adviser comply with the new requirements of PS20/6.
With contingent charging banned from 1 October 2020, apart from in certain exceptional circumstances, advisers will be under pressure to offer competitive fees for their advice, especially if the member is paying for it (rather than the scheme sponsor).
A time consuming part of the advice process is capturing information on the scheme benefits and “learning the scheme”.