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ADVISERS FORECAST BIG INCREASE IN DB PENSION TRANSFER ENQUIRIES IN 2017

  • Two thirds of advisers expect client enquiries about transfers from Defined Benefit to Defined Contribution schemes to increase over the next 12 months
  • The top reason given for declining to give such DB-DC advice is that the risks associated with challenges to historic advice are just too high

Two thirds (65%) of financial advisers expect client enquiries about transfers from Defined Benefit (DB) to Defined Contribution (DC) pension schemes to increase over the next 12 months, with almost a fifth (19%) expecting a “significant” increase. In contrast, just 2% expect a fall in enquires, according to a new study1 commissioned by Investec Wealth & Investment (“IW&I”).

According to the research, almost three quarters (72%) of advisers have received DB transfer enquiries, up from 68% in July 20162. IFAs predicted that, on average, they will continue to receive enquiries for a further nine years, generating a substantial long-term new business opportunity.

Despite the volume of potential business, the findings revealed why many IFAs are declining to provide DB transfer advice.

The top reason given (cited by 71% of respondents) was that the risks associated with challenges to historic advice were too high.  Nearly half (47%) of advisers said that the process is complex and clients are resistant to paying appropriate fees while 45% cited a perceived lack of regulatory support.  Almost a third (31%) of IFAs fear that there is too much of a focus by the regulator on the ‘headline’ figures involved in a DB transfer at the expense of ‘softer’ client needs.

Mark Stevens, Head of Intermediary Services at Investec Wealth & Investment, said: “As the wider market environment adapts to a ‘new normal’, the values being placed on DB scheme transfers have become very attractive and the demand for qualified advice shows no sign of slowing down.  “DB scheme transfers have increased the opportunities for IFAs to advise new clients on their pensions and broader financial needs.  However, it’s a fast-changing market and the complexities and risks involved mean that in many cases discretionary investment managers are integral to the effective management of client portfolios.”