Advisers see rise in clients disagreeing with DB recommendations

47% of advisers have seen a rise in insistent DB pension transfer clients over the past year and 63% say their biggest concern about DB business is the risk of future liabilities from advice that is contested.

The FCA recently warned that fewer than half the transfer cases it had reviewed were ranked as suitable.

48% of advisers 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.

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 advisers 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.

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.

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.”