Advice giant St James’s Place has once again taken the largest proportion of defined benefit transfer business over the past three years, recent figures have revealed.
Analysis of 1,500 transfers made during 2018 and 2020 by consultancy firm LCP found the three most popular firms across sectors, with 37.5 per cent of all transferred amounts going to them in 2020, were AJ Bell, Royal London, and adviser SJP.
According to the research, a quarter of all transfers went to vertically integrated advisers (wealth management firms with a financial adviser arm), with an average transfer value of £440,000.
SJP was the largest single beneficiary over the two-year period in the category with around 10 per cent of the total market.
Quilter had 5 per cent and True Potential 4 per cent.
When focusing just on 2020, SJP increased their market share dramatically so that for every £6 transferred out of a DB pension scheme, £1 went to SJP.
Their market share of 16.6 per cent of all transferred amounts was twice that of Quilter and True Potential combined.
According to last year's data, which looked at 1,250 transfers made during 2018 and 2019, SJP was the largest single beneficiary with a 9 per cent share by number of transfers and 11.9 per cent by value of transfers, with an average transfer value of £500,000.
The data from LCP also found that in 2020, platforms saw their market share rise from 23 per cent to 29 per cent of transfers and saw their average transfer payment growing by a third to nearly £695,000.
In this sector, AJ Bell dominated with 13 per cent of all transferred amounts, and the average transfer payment was around £850,000, nearly twice the average across all transfers.
In contrast, the insurers’ share of transfers fell from 48 per cent in 2019 to 38 per cent in 2020, with each of the four insurers that have more than 5 per cent of market share receiving reduced numbers of transfers. .
Only Royal London was able to maintain its market share, at around 7.5 per cent of all transferred amounts, supported by an increase in the average transfer they received of over 40 per cent to nearly £420,000.
The big losers were primarily other large insurers, with Aegon, Aviva and Standard Life all losing market share, and Prudential, last year's largest insurer, suffering a huge fall of over 50 per cent in the numbers of transfers and total amount transferred out.
Amongst vertically integrated advisers, Quilter lost a considerable amount of market share.
LCP said that new rules on DB transfers could shake up the market and in particular have an impact on the ‘vertically integrated’ wealth management firms.
From October 2020, advisers have had to ‘benchmark’ their proposed destination for transferred funds against a workplace pension alternative.
LCP said the importance of this is that workplace pension default funds are charge-capped at 0.75 per cent.
By contrast, a vertically integrated advice firm might be charging more than double this amount through a combination of ongoing advice fees, platform fees and product fees.
The FCA has previously said that of around 100,000 DB transfers per year, between 30 per cent and 45 per cent would be cases where the member could transfer to a suitable workplace pension.
Currently only around 1 per cent of transfers are being taken to workplace pensions, so if the new rules are effective, this could mean far less transfer money flowing into vertically integrated providers and more into workplace pensions such as master trusts.
Bart Huby, partner at LCP, said: “New FCA rules could lead to a quiet revolution in this market. Whilst a workplace pension is not going to be the right destination for everyone who wants a pension transfer, it would often imply much lower charges than for the products and investments generally used at present.
Provided that the advice market takes these new rules seriously, we could see a big switch in the transfer market with far more money flowing into master trusts and other workplace pensions, and less going to in-house funds linked to advice firms.
“The saving to individual members could amount to tens of thousands of pounds over their retirement”.
amy.austin@ft.com
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