The flexibility to withdraw pension income as and when needed has seen an increasing number of employees and members transferring their defined benefit (DB) scheme into a defined contribution (DC) pension.
Coupled with this, high transfer values have made it a seemingly more attractive proposition for employees and members to transfer out of their DB scheme.
From October 2020, contingent charging is banned on DB transfer advice. This means anyone wishing to take DB transfer advice will need to pay a fee up front. This may result in a scheme member not pursuing a DB transfer, when in fact it may be the best thing for them to do given their personal situation. But, it is only when the advice is received that the individual knows whether a transfer is appropriate for them or not.
However, there are steps to be put in place before regulated financial advice is undertaken and this is where Trustees and employers can ensure a much more robust process is implemented.
For example, our financial education services can provide the generic advantages and disadvantages of DB transfers, as well as the associated risks such as falling for a scam, buying inappropriate retirement products, paying more tax than necessary and ultimately running out of money. This must be provided in a completely balanced way so as not to influence the employee or scheme member one way or the other.
Our DB pension triage service also provides this information but on a one-to-one basis. The service will highlight the costs involved in transferring a DB pension and we use case studies to give an insight into whether a transfer may be suitable. After going through this in depth triage service, an employee or member should be able to make an informed decision on whether they want to proceed with pension transfer advice and incur the costs of doing so.
If an employee or member requests pension transfer advice, our Pension Transfer Specialists will review their circumstances and attitude to risk in order to provide a personal recommendation.
Without the right support, it is likely that many employees and members could make poor decisions. With dedicated Pension Transfer Specialists to hand and a wealth of experience in the workplace, our services will help to mitigate the risks you and your employees and members face.