Potential DB transfer ‘gold rush’ emphasises importance of high-quality advice

A recent report suggesting 2021 could see greater interest in Defined Benefit pension transfers once again highlights the importance of seeking high-quality transfer advice.

The consultancy Lane Clark and Peacock has forecast a ‘gold rush’ for DB transfers in the new year because of heightened pressure on household budgets.

As the Financial Conduct Authority has repeatedly stated, transferring out of a Final Salary pension is unlikely to be in someone’s best interests. Ensuring DB pension scheme members can access advice from a reputable pension transfer specialist has, therefore, never been more important.

Rise in redundancies could lead to greater transfer interest

The analysis by LCP shows quotation requests for DB transfers fell during 2020’s coronavirus lockdowns.

At the start of the year, there were around 50 requests in a typical week, but this fell by half during the spring lockdown. Volumes increased to around 37 per week in summer and early autumn, before falling to around 30 per week since the start of November.

LCP believes interest could grow in 2021 when the furlough scheme ends. Corporate insolvencies might rise and there could be large-scale redundancies. This could put greater pressure on household budgets, leading more people aged 55 and over to consider accessing their pensions.

“Emergency government measures to support businesses are expected to end in the first half of 2021, which could lead to a surge in unemployment and companies going bust,” said Bart Huby, Partner at LCP.

“Older workers who lose their job may be very tempted to consider accessing their DB pension in order to meet vital household bills.”

High-quality advice is critical

Transferring a DB pension isn’t a decision to be taken lightly. It is likely to be one of the biggest financial decisions a member ever takes, and it could be life changing.

“This makes it all the more important that schemes do what they can to help members access affordable and high-quality transfer advice so that members can make a decision that is right for them,” said Huby.

It is absolutely crucial that anyone considering transferring their DB pension seeks advice from a reputable pension transfer specialist. This means an adviser who holds the Pension Transfer Gold Standard and who offers unlimited, face-to-face meetings.

Vulnerable members could fall prey to rogue advisers

Pension scheme members who have been made redundant or are otherwise struggling financially could be particularly vulnerable to rogue advisers.

Often, clients assume that if an adviser calls themselves a pension transfer specialist, then they are one. This isn’t necessarily the case. The only way of knowing whether an adviser is who they say they are is to carry out thorough research of their credentials.

Falling victim to a rogue adviser could result in someone being rushed into making a decision that isn’t in their best interests. It is unlikely the member will fully grasp the consequences of giving up a guaranteed income.

If there is a DB transfer ‘gold rush’ we could even see clients being scammed out of their entire retirement savings.

How to find high-quality pension transfer advice

As we mentioned in a previous Palantir blog, finding specialist advice on DB pension transfers is becoming increasingly difficult. The number of professionals offering advice has shrunk from 3,000 to around 1,000 in just three years.

It’s really important that members don’t just settle for the first adviser they find. To ensure the adviser specialises in DB pension transfers, these are some of the steps to take:

• Make sure the firm is listed on the FCA Register
• Read online reviews and client testimonials
• Check the adviser holds the Pension Transfer Gold Standard
• Find out whether the adviser offers unlimited face-to-face meetings
• Question the adviser’s level of knowledge
• Don’t put price over service.

Remember, a client’s pension could be one of, if not the, most expensive asset they own. Neglecting to carry out a thorough due diligence process could prove to be an extremely costly mistake.

Please note: Transferring out of a final salary scheme is unlikely to be in the best interests of most people.

Get in touch

At Palantir Financial Planning, we specialise in providing advice on DB pension transfers.

We offer clients unlimited meetings so that we can form a complete picture of their financial needs and goals. As members of the Pension Transfer Gold Standard, we’ll go beyond the minimum requirements when giving financial advice.

Eamonn Prendergast, our Director and Pension Transfer Specialist, has the latest pension advice qualification from the Chartered Insurance Institute (CII AF7) as well as a qualification in retirement income planning (CII AF8).

Eamonn has also been shortlisted as a finalist for two prestigious financial awards: Adviser of the Year at the 2020 Professional Adviser awards and Retirement and Later Life Specialist of the Year at the 2020 Personal Finance Society Awards.

For more information, please email info@palantirfp.co.uk or call 020 8464 9012.