On the go: Trustees of defined benefit schemes have been encouraged to work with a wider range of financial advisers as it emerged only 4 per cent have been appointed by a scheme.
A joint report by Royal London and LCP, published on Sunday, has put pressure on schemes to ensure their members are adequately informed before transferring out.
The report found only 29 out of 750 IFAs surveyed (4 per cent) have been appointed by a scheme.
According to LCP and Royal London, schemes need to broaden the use of advisers and identify a pool of Financial Conduct Authority-registered advice firms that members can use if they wish.
The report stated: “This would not preclude the member from using an existing adviser if they have one, but for most members the adviser made available by the scheme is likely to be an attractive option.
“By having a small number of advice firms handling the bulk of the scheme’s transfer advice, there will also be cost savings for adviser and scheme alike, not least as the adviser gets to know the particular features of the scheme’s benefits and processes in detail.”
To help further, the scheme could then subsidise the cost of the advice, according to LCP. The trustees could, for example, pay the set-up costs and then pay the company a retainer or take on the cost of the advice altogether.
The report said some schemes have gone even further and identified a panel of advice companies for members to use, subsidised the cost of advice, and then appointed a further tier of oversight to monitor the financial advisers on the panel to ensure members not only received good service during the transfer but also afterwards.
Steve Webb, partner at LCP, said: “Pension schemes have an important role to play in ensuring that members are fully informed about their options and can access high-quality advice.
“Growing numbers of schemes have chosen to appoint one or more advice firms to support members, as well as subsidising the costs of advice.
“Members benefit from the reassurance that the scheme has undertaken due diligence on the advice firms involved, as well as from reduced advice costs where the scheme is making a contribution.”
This article originally appeared on ftadviser.com
