You are here: Home - Retirement - Retiring now - News -

Watchdog proposes changes to final salary pension transfers

0
Written by: Paloma Kubiak
21/06/2017
The Financial Conduct Authority has proposed tougher advice measures be adopted by firms to help consumers considering transferring from a Defined Benefit to a Defined Contribution pension.

Holders of defined benefit(DB) or final salary schemes are increasingly transferring out at retirement. A survey of more than 800 financial advisers by mutual insurer Royal London, found a 50% rise in the volume of transfers out of final salary pensions taking place in the last year, with the most common transfer value between £250,000 and £500,000.

See YourMoney.com’s The case for and against transferring out of your final salary pension for more information.

The Financial Conduct Authority (FCA) has today published proposals aiming to ensure consumers receive appropriate guidance when making the decision of whether to transfer. These include:

  • replacing the current transfer value analysis requirement (TVA) with a comparison showing the value of the benefits being given up
  • introducing a rule to require all advice in this area to be provided as a personal recommendation, which fully reflects consumers’ circumstances and provides a recommended course of action
  • updating its own guidance on assessing suitability when giving a personal recommendation to convert or transfer safeguarded benefits, so that advisers focus on whether a transaction is right for a particular individual
  • introducing guidance on the role of a pension transfer specialist.

‘Information from administrators can be misleading’

Nathan Long, senior pension analyst at Hargreaves Lansdown, said the steps should improve the relevance and personalisation of the transfer advice process: “Put simply, a defined benefit pension scheme is an annuity but at a bargain price. For most retirees a secure income is a fundamental necessity, so the default must be that you are better off keeping a defined benefit pension. In certain circumstances a transfer can make sense, but the pension must be viewed in light of a person’s overall finances rather than in isolation. Forcing schemes to allow people to transfer only part of their pension ensures the rigidity of defined benefit pensions can be adapted to cater for modern working patterns among older workers.

He says that information from administrators can be misleading, confusing or just plain wrong: “With this backdrop it is imperative that robust protections are in place to ensure quality advice from experienced advisers is provided when transferring a defined benefit pension. The proposals put a greater emphasis on suitability, rely less on mechanistic analysis and ensure advisers challenge unrealistic expectations which is great for ensuring we get the best outcome for pension savers, but does little to reduce the cost of advice in transferring such a scheme. It also sets out that transferring such a scheme requires a personal recommendation, leaving any thoughts of a half-way house guidance service dead in the water.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Self-employed grant to double as Job Support Scheme revamped

Self-employed workers affected by coronavirus could receive up to £3,750 in the next tranche of grants, double...
Self-employed grant to double as Job Support Scheme revamped

Universal Credit users should receive stop-gap starter payments

Universal Credit claimants should receive a starter payment to stop them facing a difficult choice of five wee...
Universal Credit users should receive stop-gap starter payments

Nearly half of home offers ‘down valued’ after price agreed

A down valuation can affect the size of mortgage you are able to get, preventing the purchase from progressing...
Nearly half of home offers ‘down valued’ after price agreed

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week

Read previous post:
Green Deal home improvement loans relaunch

The Green Deal Finance Company (GDFC) has started offering loans to homeowners looking to make their properties more energy-efficient, two...

Close