Financial advisers call for clarity on DB to DC transfer rules

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  • Three quarters (73%) of financial advisers anticipate greater demand for pension transfers over the next 12 months
  • More than a third (36%) believe regulatory guidance around DB transfers is unclear and 71% believe current guidance is too cautious
  • Three quarters of financial advisers would welcome DB schemes offering partial transfers

More than half (53%) of UK financial advisers see advice on defined benefit (DB) to defined contribution (DC) transfers as a key area for growth over the next two years, according to Aegon UK’s new ‘Adviser Attitudes Report’*. However a lack of clarity around what the regulator sees as best practice on transfer advice remains a concern.

The report, which tracks attitudes and concerns of the UK financial adviser market, found that around three quarters (73%) of financial advisers expect demand to increase for DB pension transfers over the next 12 months with a third (30%) expecting a significant increase. In the last two years more than 200,000 people have transferred £50billion** out of DB schemes and financial advisers are clearly not expecting this to slow down.

However, there’s a clear call for the FCA to update and clarify its expectations around DB transfer best practice. The FCA’s consultation on ‘Advising on Pension Transfers’ closes on 21 September and there will be huge interest in how this translates into new guidance. More than a third (37%) of advisers say that the regulatory guidance around how transfer advice should be given is unclear. Although a similar percentage of advisers (39%) believe that the advice rules are clear enough, the research revealed that three quarters (71%) of advisers feel the regulations are leading to too much caution when advising on DB to DC transfers.

Under existing pension freedom rules, people with DC pensions can access their pot any time from age of 55, choosing how and when to take income. In order to access the freedoms, those with DB scheme benefits need to transfer their money to a DC scheme, but in doing so, give up the security of a fixed income for life. Some DB schemes offer members the option of a ‘partial transfer’ of a portion of their benefits, but this is not a statutory requirement and it’s offered by only a limited number of schemes due to administration complexity and cost. However, three quarters (73%) of advisers think that greater availability of partial transfers from DB schemes would be a positive development.

Steven Cameron, Pensions Director at Aegon said: “The attractions of pension freedoms coupled with rocketing transfer values and growing concerns over the adequacy of DB scheme funding is fuelling demand for advice from clients considering transferring out of DB schemes. However, this is a very complex area and advisers are calling out for refreshed guidance from the FCA on its expectations for DB transfer advice now we have pension freedoms. 

“No two clients are the same, and transferring from a DB scheme and giving up a secure income for life is certainly not right for everyone. With an ever growing demand from clients looking at this option, advisers are keen to see how the FCA will update its guidance following their consultation. Clear, updated guidance will allow advisers to offer their services with confidence without feeling they have to be unnecessarily cautious.”

ENDS

 * Research conducted by Opinium amongst 252 UK Financial Advisers. The fieldwork was conducted 21 - 27 June 2017.

 ** Mercer suggest pension scheme members cashing in have reduced public scheme liabilities by £50 billion, with 210,000 people leaving the schemes https://www.ftadviser.com/Articles/2017/06/23/FTA-50bn-DB-schemes 

Further information

Neil Cameron

Media Relations Manager
Aegon UK
neil.cameron@aegon.co.uk
Tel: 0131 549 3393
Mob: 07972 403 757

Notes to Editors

  • In the UK, Aegon offers retirement, workplace savings and protection solutions to around two million customers, and employs more than 3,450 staff. More information: https://www.aegon.co.uk
  • As an international life insurance, pensions and asset management company based in The Hague, Aegon has businesses in over twenty five markets in the Americas, Europe and Asia. Aegon companies employ over 28,000 people and have millions of customers across the globe. Further information: www.aegon.com
  • Aegon is the Lead Partner of British Tennis.

Aegon is a brand name of Scottish Equitable plc. Scottish Equitable plc, registered office: Edinburgh Park, Edinburgh EH12 9SE. Registered in Scotland (No. 144517). Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 165548. An Aegon company. www.aegon.co.uk

© 2017 Aegon UK plc.