We’re always keeping an eye on the trends and shifts that may impact your financial outlook. Recently, some interesting stats have emerged on Defined Benefit (DB) pension transfers and we wanted to summarise what’s happening in this area. The Financial Times published an article titled “Defined benefit advice: advisers drop permissions as transfer demand wanes” which covers these changes in the DB pension advice market.
You may have heard that the world of DB transfer advice has changed a lot. Over the last decade, a combination of new regulations, fluctuating transfer values, and changing client needs has really reshaped the landscape for pension transfer specialists.
Fewer DB transfer advisers and activity
One of the key points is the big drop in the number of firms and individual advisers with permissions to advise on DB transfers. In fact, Freedom of Information requests to the Financial Conduct Authority (FCA) show an 89% fall in the number of DB pension transfers themselves. Not all of this is bad news; it means the market is maturing and unsuitable transfers are becoming much less common.
What’s driving this change? Well, several factors are at play. Rising interest rates have hit DB transfer values hard, making them less attractive than they were. So, for many, staying in their defined benefit scheme now looks like a better option for their retirement planning.
Regulation and DB pension advice
Regulation has also had a big impact on the defined benefit pension industry. The FCA has introduced measures like the ban on contingent charging and the idea of “abridged advice” to protect consumers and ensure pension transfer advice is in their best interest. While these changes have made it harder for some firms to run in this space, the underlying aim is to ensure high quality suitable advice is a top priority for pension scheme members. But as our Chief Executive, Simon Chrystal, points out “We have an ageing population, many of whom will need flexible strategies to manage retirement income amid declining liquid savings,” he said. “DB transfers — while not always suitable — can be an important planning tool in the right circumstances”. The concern is that if the number of qualified pension advisers continues to shrink, there will be a gap in support for those who really need this specialist guidance.
Why DB Pension advice is still important
While the market has seen a reduction in overall activity, the need for expert, personal DB pension advice remains. As David Huntbatch of Kind Wealth says “A qualified DB adviser helps clients explore the full range of options, so decisions are right for them and their family for a confident retirement”.
Want to read the full article and data behind these trends? You can find the article Defined benefit advice: advisers drop permissions as transfer demand wanes on the FT Adviser website.
At WPS Advisory, we believe in clear, accessible financial advice to help you make informed decisions about your future. Careful thought is needed when it comes to retirement planning, and your pension plays a key role. If you need a helping hand in knowing your options and making the right decisions for your individual circumstances, our advisers are ready to help — let’s make a plan, together.