ADVISERS WARN ON ‘INSISTENT DB TRANSFER’ CLIENTS

  • 47% of advisers have seen an increase in clients disagreeing with DB recommendations
  • Nearly two out of three are concerned about potential future complaints
  • Momentum research finds 58% would back legislation to ensure transfer funds are invested to ensure capital is protected

Advisers are warning about an increase in insistent clients disagreeing with their recommendations on defined benefit pension transfers, new research from pension specialist and SIPP provider Momentum Pensions shows.

Its nationwide study found 47% of advisers have seen a rise in insistent DB pension transfer clients over the past year and nearly two out of three (63%) advisers say their biggest concern about DB business is the risk of future liabilities from advice that is contested.

The Financial Conduct Authority is turning the spotlight on DB transfers warning that fewer than half the transfer cases it had reviewed were ranked as suitable and has stressed that advice has to be ‘holistic’ looking at clients’ overall circumstances and ‘bespoke’ for investment, product and benefit solutions.

Momentum Pensions research with advisers found 58% would support legislation to stipulate the investment vehicles DB funds are transferred into including capital protection and hedges against inflation and volatility.

Around 53% of adviser say their biggest fear for consumers who transfer is that they are surrendering a guaranteed income for life while 48% worry that customers do not understand the investment risks of moving into defined contribution pensions.

Momentum, which has expanded the investment choices available to advisers and their clients in its SIPP to include Passive funds and options which offer guaranteed income, believes the FCA focus on transfers means ‘one size fits all’ approaches are no longer valid.

John McCreadie, Head of Sales (UK), Momentum Pensions, said: “There is clearly strong demand for DB transfers with The Pensions Regulator estimating around 80,000 transfers a year with up to £50 billion moved over two years.

“It is a real issue for advisers faced by clients who are insistent on moving to benefit from relatively high transfer values and the perceived increased flexibility of SIPPs and DC schemes.

“DB schemes pensions offer valuable benefits and anyone transferring should be looking for choice and value from their investment selection as well as full flexibility and a range of ways of accessing the solution.”

The adviser research found 48% are concerned about the disconnect between the FCA and The Pensions Regulator on best practice regarding DB transfers while 42% are worried about a rise in the cost of Professional Indemnity insurance from more transfers.

However, advisers are well aware that the rise in DB transfer business over the past two years has been an important source of business – around 60% said they were concerned about the potential impact on their business if transfers dry up.

Momentum Pensions has completely redesigned its SIPP range to ensure it provides a range of solutions to help with the requirements as they currently stand but also the more bespoke approach that is likely to be needed going forward. It has linked with Vanguard to provide low cost passive fund solutions, offers  Sharia and Ethical options through other providers and access to the only guaranteed income Trustee Investment Plan on the market through LV=.

Its Core SIPP aims to give advisers and clients a wide range of cost effective ways to purchase investments supported by Momentum’s best-practice approach to due diligence and governance.

Momentum has a pedigree in the SIPP market stretching back over 20 years and is established as a top 20 provider in the UK.

The Momentum SIPP Range is administered in Manchester and is backed by a highly skilled team with servicing and technical expertise, including property transactions, within the specialist pension market.

Research was conducted in September 2017 by PollRight with 102 advisers specialising in pensions planning.

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