The BBC is to offer paid-for independent financial advice to help members get the most from the pension freedoms, in particular to support those considering transferring their assets.
Since the announcement of pension flexibilities in March 2014, schemes have been wrestling with how best to serve their members in light of the new options.
Many have balked at the idea of providing products such as drawdown in-house, and are looking to external vehicles for their members.
Make sure you understand what you are giving up before you sign up to transfer out
Ian McQuade, Muse Advisory
The BBC's £12.9bn scheme first wrote to eligible members earlier this month to alert them to the support being put in place. It will write again later this year with details of their options and how to get financial advice.
The scheme is also offering paid-for financial advice for those with a transfer value worth £30,000 or more.
“This core financial advice will cover the needs of the vast majority of members,” said a spokesperson for the BBC.
“Bespoke and any ongoing investment advice will not be included and further details of the scope of advice will be communicated to members in due course.”
The BBC declined to give further detail on other aspects of the support being offered to members, but said: “The intention is that both eligible active and deferred members approaching retirement will be able to access the new pensions freedom and flexibility and support will be put in place to help them make a decision.”
The scheme had 12,237 active members and 29,374 deferred members as at March 31 2015.
Support and education
Matthew Demwell, UK head of member options at consultancy Mercer, said the level of support provided would likely be spread across four levels:
Schemes provide general information about freedom and choice and leave members to sort it out themselves. Demwell said: “I’m surprised how many employers are going down that route.”
Schemes quote a transfer value automatically to members approaching retirement, but do nothing else. Demwell describes this as the worst option, because schemes bear the cost of setting up the system and calculating transfer values, but members are not much more likely to take a transfer as they still need to find and pay for an adviser to proceed.
Quote a transfer value to members approaching retirement, but also give some examples of other options they can take such as how much of a dependant’s pension they can afford, or how much they could get in an enhanced annuity.
Schemes provide transfer values and information on options, but also retain a financial advice company and provide members with a level of free financial advice.
He said schemes should not have to cover the whole cost of more specialised advice, but providing some free advice would likely lead to take-up of transfers of 20-35 per cent.
However, Ian McQuade, client director at governance consultancy Muse Advisory, said many schemes were worried about appointing a financial adviser to speak to members, for fear of being on the hook for the outcome of any advice received.
He added the market for retirement products was still developing in light of the freedom and choice reforms.
“We’re researching the market and talking to a few people about their pre-retirement and at-retirement solutions,” he said. “It really is a developing market.”
“Make sure you understand what you are giving up before you sign up to transfer out,” he added.
