Six out of 10 employers have said that their members struggle to source advisers equipped to provide pension transfer advice.

According to the Association of Consulting Actuaries’ (ACA) second interim report of this year’s ACA Pension Trends Survey, there has been a significant wave of pension transfer requests from defined benefit schemes, which is placing considerable pressure on scheme administration, ACA has highlighted.

Transfer value activity specifically is adding between 10 to 20 per cent to scheme administration costs over previous years.

With six in 10 employers’ members having difficulty to obtain transfer advice, this may be a contributing factor in only one in four requests being completed, ACA noted.

Furthermore, 39 per cent of the 466 employers that responded to the survey that had DB schemes, 47 per cent said the incidence of transfer requests exceeds five per cent of scheme members, with a third of these employers reporting requests exceeding 10 per cent of members.

Completed pension transfers were also at a lower level, with just 16 per cent of employers reporting completed requests exceeding five per cent of scheme members.

ACA chairman, Bob Scott commented: “There are concerns about both the availability and appropriateness of the regulated advice available to DB scheme members. Other research suggests that only around half of those who took advice to transfer were properly advised. Of the other half, one third of recommendations were unsuitable and the remainder were unclear.

“This is disappointing but isn’t surprising. DB pensions are complex and varied and their value is not well understood. Comparing a DB pension to uncertain post-transfer investment returns and income choices is fiendishly complex.

“Our survey results confirm the ongoing shortage of IFAs prepared to provide guidance services in this complex area. However, many schemes are additionally noting to our members that where IFAs are providing advice, the questions they pose during the transfer process are varied and time consuming. The quantum of enquiries and differences in approaches is posing difficulties for administrators and pushing up administration costs. Standardisation in the questions asked would seem to be a sensible step and this may be an area where the FCA could act swiftly to help all concerned.”

Over £50bn has been withdrawn from DB schemes over the last two years, with the average transfers out now exceeding £250,000.

The ACA’s findings have reflected growing concern that high transfer values are encouraging members to cash in DB pensions. This is growing further by ballooning scheme deficits and recent reports that have suggested three million UK DB members may only have a 50 per cent chance of receiving their benefits in full.

Share Story: