Stan Russell

Retirement Income Expert at Prudential

'Insistent clients' pile on the DB transfer pressure

14 July 2017

  • More than 80 percent of advisers report an increase in requests for advice about transferring defined benefit pensions
  • Two out of five advisers warn of increase in clients completing
    transfers despite recommendations not to
  • One in three adviser firms plan to increase FCA permissions for transfers

High transfer values for final salary schemes are piling the pressure on advisers as insistent clients disagree with their recommendations, new research from Prudential1 shows.

More than two out of five of advisers (44 per cent) have seen a rise in the past year in the number of insistent clients wanting to push ahead with defined benefit pension transfers despite recommendations against. About half of advisers with insistent clients (51 per cent) say they have helped with the transfer after their recommendation was over-ruled.

The biggest concern of advisers (61 per cent) about the impact of defined benefit transfers on consumers is the risk of giving up a guaranteed income for life, while 56 per cent fear clients will face unnecessary tax bills as a result.

Around 39 per cent of firms, however, are concerned about the risk of future liabilities if advice they give is contested while 17 per cent are concerned the cost of professional indemnity insurance will rise.

Firms are responding by ensuring they have the right Financial Conduct Authority permissions to conduct transfers. Prudential’s research found about 34 per cent of firms are considering increasing the permissions they have while 17 per cent say they already have the required permission.

The rise in enquiries about defined benefit transfers is highlighted by the study. About 81 per cent of advisers questioned report an increase in requests for advice about transfers over the past year.

Nearly half of advisers (48 per cent) do not believe transfer values will fall over the next five years and in any case believe that high transfer values are not the only driver for transfer demand with 58 per cent saying increased flexibility is a major attraction for clients.

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