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Defined benefit pension transfers under the spotlight

Jonathan Watts-Lay
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Defined benefit (DB) pension failures have hit the news headlines recently bringing the support that members receive under the spotlight. WEALTH at work is calling for more to be done to protect members from the risks around DB pension transfers. Contributor Jonathan Watts-Lay, Director, WEALTH at work, comments on what schemes, trustees and employers could do better.

“I think there’s a number of things. The first thing is do people need to go straight to regulated advice? Because even though the rules say that if you’ve got a value of £30,000 or more in a DB scheme, you must take advice, the question is would guidance help them before they make that decision on advice? So we would urge employers and schemes to look at this because  guidance can give people the advantages generically and the disadvantages generically of moving out of a DB scheme, which may then influence people to say, ‘Well actually this isn’t really for me’, and therefore not go for financial advice. But if they do go for advice they understand why they’re going for it.

I think there’s also an issue about employers and schemes actually going and getting reputable firms to facilitate financial advice. We’ve seen the factory gating down in South Wales, we’ve seen some of the extortionate charges that are being made. Whereas actually if the schemes and the employers went out and found advisers that could deliver financial advice, and did their due diligence, compliance checks, looked at the compliance processes and  agree a price that employees would ultimately pay, I think that would really help make the whole process far more robust.

And thirdly I think the whole idea of partial transfers; currently only about 15 percent of schemes allow partial transfers. Whereas actually if that became much more widespread then actually maybe there’d be a much better management of risk, where people would say, ’Well actually I do want to transfer some of it, but I’m happy to leave some of it where it is.’ And that might be a better outcome for all.”


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