Defined BenefitOct 29 2020

Better Retirement leaves DB transfer market over PI cost

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Better Retirement leaves DB transfer market over PI cost
ByAmy Austin

Advice firm Better Retirement Group has suspended its defined benefit transfer permissions after failing to renew its professional indemnity insurance.

According to a notice on the Financial Conduct Authority’s register, the firm must stop advising on DB transfers from October 14.

It must also cease “completing pipeline business in relation to the conversion or transfer of pension benefits” and must not confirm that “independent advice has been provided” as part of the Pension Schemes Act 2015.

The firm has also received an asset retention requirement, also effective from October 14.

This means it cannot sell business assets, for example its clients book, without approval from the regulator.

Stuart Bayliss, executive chairman at Better Retirement, said the firm voluntarily gave up its permissions after high costs meant it could not get PI cover.

Mr Bayliss explained how the firm had originally gone down the route of self-insuring until the FCA made it clear that this was not an option.

He said: “We had gone down the route, which quite a lot of people did, of self insuring, as we had over £500,000 within our capital at [that] point.

“But the thematic review made it perfectly clear that was not an acceptable route and that we should either find PI or do a VREQ (voluntary requirement). This was back in August.

“We volunteered not to take on any new business for DB transfers on the basis that we could finish our current book which was about 30 cases and took until October. The FCA was agreeable to this.”

Mr Bayliss said the firm looked to get PI cover but said it was “too expensive”.

Mr Bayliss added: “Under PI we would not have been doing our own business processes because everything would have needed to go through the PI’s choice of process and compliance review.

“I wasn’t happy with this because they were choosing a single entity for that and there were connections between the two organisations which I didn’t think was good news.”

On this basis, the advice firm submitted its VREQ in October.

Mr Bayliss said the firm may consider entering the market again in the future but only if rules around partial transfers are changed.

A partial transfer occurs when some of the value of the DB scheme is transferred to a defined contribution pot while leaving some DB rights behind. 

Pension funds are not legally obliged to offer partial transfers, but trustees can choose to.

Better Retirement is not the first firm to go down this route.

Earlier this year (July 22), pension transfer specialist Tideway ceased its DB advice business, only two years after it relaunched its service for advisers.