A report published today calls for employers to provide greater assistance to those workers who want to transfer their ‘defined benefit’ pension plan into a scheme that they can manage themselves – and access when they want to.
Jointly published by mutual insurer Royal London and pension consultant Lane Clark & Peacock, the report says that unless such advice is made available, there is a danger that savers could end up dealing with rogue advisers who go on to strip them of their pension.
Transfers have proved popular since new rules were introduced in 2015, allowing people to take greater control of their pensions and to access them from age 55 (age 57 from 2028).
Bosses must offer advice to those wishing to transfer their defined benefit pension into a scheme that they can manage themselves, a report says
Workers with money tied up in a defined benefit pension plan – where the pension paid at retirement is based on a combination of years worked and salary – have been able to exchange it for a cash sum that is then transferred into their own pension scheme. They can then manage this pot as they wish, withdrawing sums when needed (subject to tax).
But some of those who have made such transfers have suffered from poor advice, or even worse fallen victim to fraud.
This has led to a regulatory crackdown and higher costs for those advisers still willing to organise transfers. The report says that of 500 pension transfer advisers it interviewed, nearly half were unsure whether they would still be offering advice in a year’s time.
In light of this, the report calls for more company pension schemes to appoint advisers to conduct all transfers. This, say Royal London and LCP, would remove concerns about poor advice – the employer would thoroughly vet the adviser beforehand – and also allow employers to subsidise the cost of advice given.
Royal London’s Justin Corliss says: ‘Deciding whether or not to transfer out of a defined benefit pension is a huge decision and members should be able to access affordable, impartial advice.’
Steve Webb, a former Pensions Minister and now a partner at LCP, says: ‘Pension schemes have an important role to play in ensuring that members are fully informed about their options and can obtain high quality advice.’