DB solvency fears driving transfers

Fears over the future solvency of defined benefit pensions is fuelling high demand for transfer advice say advisers.

Research from Momentum Pensions shows 63 per cent of advisers are worried about the long-term viability of schemes their clients are invested in, and 57 per cent predict these concerns to increase in the future. Over half – 55 per cent – of 107 pension specialist advisers surveyed say they have seen an increase in demand for DB transfers this year.

The FCA has recently launched a consultation on advising on DB transfers, proposing a more holistic approach to transfer advice rather than the historic transfer value analysis approach. It has also suspended a number of firms giving transfer advice.

A 2015 paper from the Pensions Institute argued that around 1,000 DB schemes are stressed because they have financially weak sponsors.

Momentum Pensions head of sales UK John McCreadie says: “Advisers clearly believe that DB scheme viability is a major issue and so do their clients.

“Recent industry figures valued DB pension liabilities held by small and medium-sized enterprises jumped 7.5 per cent to £4.3 billion in 2016.  Low interest rates, increasing life expectancies and rising costs are headwinds for future final salary scheme solvency and are added concerns to retirement advisers and their clients.

“Market data indicates that around £50 billion has been moved from DB schemes by a total of 210,000 members since April 2015. The growth in transfer advice is placing unprecedented demands on advisers who need unwavering support from SIPP providers to ensure the SIPP meets their clients’ future retirement needs. This means robust due diligence procedures, clarity on charges as well as the widest choice of investment options and deep technical support.”