On the go: There is no right answer to whether trustees should be appointing financial advisers to help members make retirement decisions. However, doing nothing is not a risk-free option, a new policy paper from Royal London and Eversheds Sutherland has stated.
The report, published on Wednesday, stated that pension plan trustees continue to face a dilemma over how engaged they should be in ensuring that members get the right advice on whether or not to transfer.
According to the Financial Conduct Authority, between the introduction of pension freedoms in April 2015 and September 2018, more than 230,000 members of defined benefit pension plans received advice on whether to transfer their benefits, with an average transfer value of £350,000.
Trustees have been nervous about getting involved at all, since liability could fall back on the trustees if things go wrong.
But on the other hand, scandals such as that around transfer advice to members of the British Steel Pension Scheme, and recent Pensions Ombudsman determinations requiring trustees to check where members are transferring to, demonstrate clearly that doing nothing is not risk-free, Royal London and Eversheds Sutherland stated.
In the independent review of communications and support given to BSPS for the Pensions Regulator, Caroline Rookes said that it “would have been helpful if the trustees had compiled a list of advisers willing and able to take on pension transfer advice” for the scheme’s members.
“Instead, members were referred to Unbiased or the FCA website. The former is not unbiased and the latter is not easy to use, nor does it make clear if the particular firm of advisers deals with DB transfers.”
Today’s report backs up this conclusion. It sets out a “roadmap” of engagement by trustees, ranging from minimal involvement, such as simply signposting members to third-party guidance websites or adviser directories, all the way to a “gold standard” of appointing nominated IFAs for members to use if they wish and ensuring ongoing supervision of the performance of those advisers.
Sir Steve Webb, director of policy at Royal London and former pensions minister, noted that despite all of the controversy around this issue, it remains the case that transferring out of a DB pension will be the right answer for some people in some circumstances.
“There is much to be said for trustees helping members to access high-quality, affordable financial advice to help them to decide if such a transfer is right for them,” he said.
Francois Barker, partner and head of pensions at Eversheds Sutherland, said: “When it comes to trustees and pension transfers, there is no risk-free response. The British Steel case demonstrates the reputational damage that can be done when members are left to find their own sources of advice.
“Trustees who engage with the issue in a properly governed way may well be less exposed than those who do nothing at all.”
