More than double the usual numbers transferred out of DB pensions in the first year after the introduction of pension freedoms and this number is set to continue rising.
Anyone considering a transfer of DB pension benefits needs to take financial advice but how much help are employers and trustees giving them to find the right advice?
DB pension transfer advice is highly specialist, complex and carries significant risk both for the member and the adviser. For the vast majority of people with average wealth, it is unlikely that a DB transfer would be suitable. However, there are some eye-wateringly high transfer values at the moment and so to the uninformed a transfer may seem very attractive.
Many IFAs won't have specialists or experience in this area of advice and some firms have gone on record saying they won't provide such a service. So how can individual employees find an adviser who they can be assured will give them the right advice?
Employers and trustees are in an ideal situation to provide them with some guidance:
Provide employees with financial education regarding DB transfers and how to seek suitable advice
Select a firm/ panel of firms that are experienced and have well-established and robust DB transfer services and direct employees to them.
Provide employees with a DB transfer checklist against which they can measure advice firms
It is clear something needs to be done or in 10-20 years’ time we will look back on this as one of the biggest "mis-selling" scandals of all time.
Employers and trustees are perfectly positioned to guide their employees/ members to the type of advice firms that can give them sound advice. It is time for them to step off the fence and do more to support individuals in getting the right advice before many make one of the biggest mistakes of their lives and transfer out of a DB pension.
Up to one million DB members may transfer out over the next 10-20 years 10 March 2017 One million defined benefit members are likely to explore their options over the next 10-20 years, writes John Hatchett, Hymans Robertson The Financial Conduct Authority is looking at defined benefit (DB) transfers because the numbers cashing out of DB pensions have soared since Freedom and Choice. Twice as many people transferred in the first year following the introduction of pension freedoms. Momentum is increasing due to record high transfer values making DB transfers more attractive - both to members and to scammers. Many of those transferring won’t have had appropriate support and advice which is worrying. Whether individuals stay or leave the scheme, there are huge risks members could make poor decisions with a life-changing and life-long impact.