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DB to DC transfers face significant obstacles

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As a result of the new flexibilities that apply to DC pensions, many are expecting a flurry of interest in transfers from DB pension schemes. However, pension specialists at Broadstone believe that many DB scheme members who want to transfer may end up banging their head against a brick wall.

John Broome Saunders, consultant at Broadstone, said: “From 6 April there’s a legal requirement to take advice before transferring. Quite rightfully taking advice should be a key step in the process but actually finding an adviser who is happy to provide advice on such a transfer is likely to be difficult. This is understandable as industry memories are still fresh from the last pensions mis-selling scandal and the industry is mindful of the potential future financial cost in the event a member complains many years down the line. The reality is these transfers cannot usually be carried out without the assistance of an adviser, and many advisers may simply refuse to assist in processing a transfer, especially if they have advised against it.

What is more, many large pension providers are now refusing to accept DB transfers unless a member has actually been advised that transferring is the best option. Frankly, it will be a miracle if anybody from a DB scheme manages to transfer, given the impediments that appear to be looming. Most will probably bang their heads against a brick wall and give up – frustrated by the fact that advice, that quite rightfully they will need to pay for, is unlikely to recommend a transfer as being the best option.”

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