MEMBER REQUESTED DEFINED BENEFIT TRANSFER VALUES
by Hélène Galy Director of the Willis Research Network Background and numbers Every member in a private sector defined benefit scheme has the right to request a transfer value at least once a year. This is essentially a calculation of the cash value of the promised retirement income from the scheme. Interest in transfers from defined benefit schemes has greatly increased since the Pension Freedoms were introduced. The proceeds can now be taken however the member chooses with complete flexibility, making them more popular. Figures from the FCA show that around 90,000 clients received transfer value advice between October 2018 and March 2020. It is likely that at least as many requested quotes but did not go on to take advice. Many of these quotations would be for members aged 55 and above, looking at their retirement options. Transfer values have been growing due to falling interest rates and consultant Lane, Clark and
Peacock (LCP) recently showed that average transfer values have now broken the £500,000 barrier, They also estimated that around 21% of those that requested a quotation actually went on to transfer funds. Advice Specialist independent financial advice is compulsory for all transfers of over £30,000. Members simply cannot transfer without documentation that shows this advice has been provided. However, with increasing perceived risk and rapidly rising insurance costs, 46% of these specialist advisers have withdrawn from the market in the last year alone as recently evidenced in this article from International Adviser. This leaves a reduced pool of specialists able to provide the compulsory advice needed. Costs Given the increased costs to advisers and the reduction in supply, members have seen the costs for this advice increase.
