On the go: Advisers have been urged to proactively check whether their clients could be entitled to a top-up payment on their defined benefit transfer, which could help trustees in tracking down members affected by the latest guaranteed minimum pensions ruling.
David Brooks, technical director at Broadstone, said advisers play a significant role in helping their clients get these top-ups as there is a huge amount of work required to correctly identify which members are affected.
He said: “If an adviser has a client and they know they’ve made a transfer from a contracted-out DB pension scheme, then I would expect them to proactively contact the scheme as there is a fair chance there would be some additional money.
“The scheme may struggle to work it out, and it may take time to do so. However, in the long run it may well be assisting the scheme in the cost of tracing members who transferred out many, many years ago.”
This comes after the High Court ruled on Friday that trustees committed a breach of duty if they did not equalise the member’s GMP benefits at the time of calculating the cash equivalent transfer value.
Therefore, trustees of DB schemes will have to revisit transfers made in the past 30 years for individuals with contracted-out benefits, and provide a top-up if necessary.
Ricky Chan, director and chartered financial planner at IFS Wealth and Pensions, said while clients may not necessarily need advice to get this top-up, advisers can help clients check if their cash equivalent transfer value (of the transferred out pension) has received an equalised GMP already.
Mr Chan said: “It appears that the scheme trustees are not legally required to proactively contact affected clients — though many may choose to do so to limit potential liability in future — and many clients won’t have the technical knowledge to understand if they were affected.
“Hence, I think the responsibility may fall upon advisers’ shoulders. Of course, a problem arises where clients have disengaged with their adviser or the client has passed away.”
Mr Brooks agreed that adviser support would be needed as calculating the sums was likely to be complex.
He added: “There could be the option to have the money paid directly to the member. Advisers may feel a duty of care to that person to help.
“It is feared that claims management companies may try and take over cases for members, which may not be in the client’s best interest.”
This article originally appeared on ftadviser.com
