Editorial: Moving away from the security of a guaranteed defined benefit fund is a big decision to make. For many, it may be the wrong decision.
That is why the Financial Conduct Authority has been cracking down on poor transfer advice to make sure recommendations are appropriate.
In 2017, the FCA found that fewer than half of DB transfer advice processes were suitable. The watchdog also stopped several companies from advising on transfers following investigations into steelworkers’ pensions.
Pension transfers hit £10.6bn in Q1 2018, with the vast majority of these likely to be people dropping DB schemes in favour of more flexible DC plans, according to AJ Bell.
Last year, 61 per cent of employers surveyed by the Association of Consulting Actuaries said members have difficulty finding advisers for transfers.
Some employers choose to address these issues by engaging an independent financial adviser for their scheme members.
This is exactly what Luxfer Group has done. The company has said this is an opportunity for members to discuss retirement options without having to pay for advice or find a financial adviser willing to provide transfer advice.
In an ideal world, more companies would follow suit – though that is likely to depend on whether they have the resources to do so.
When an employer puts an adviser in place, the advice can often be provided more effectively. The employer can also be reassured about the quality of advice members are receiving.
A recent Pensions Policy Institute report said innovations in technology may help make advice and guidance more effective and accessible over the next 10 to 15 years.
Robo-advice, for example, may be a lower-cost alternative to a traditional IFA. But ultimately, it is difficult to find a solution that beats good-quality face-to-face service.
Pensions Expert will be on its annual summer print break for a few weeks, with the magazine returning on 20 August. Until then, we will continue to update and inform you on all things pensions via our website and daily news alerts.
Sophia Imeson is associate editor at Pensions Expert. You can follow her on Twitter @SophiaImeson and the team @pensions_expert.
