DB pension transfer advice
The additional information provided at this time for advisers giving DB pension advice is summarised below:
- Demonstrating transfers are suitable
The requirement to start from a position that a transfer is only suitable if a firm can clearly demonstrate that, on contemporary evidence, the transfer is in the client’s best interests continues. While it may be more difficult to obtain all the information about a client’s personal or financial circumstances, or about their pension schemes or investments, firms must not make a personal recommendation if they do not have all the necessary information (COBS 9.2.6R);
- Addressing customer misconceptions
Clients may have misconceptions as a result of the crisis, for example they may believe that transfer values ‘are at an all-time high.’ Even were this to be true, which is unclear at this time with some schemes delaying transfer value quotations as a result of market uncertainties, firms should not assume that increases in CETVs automatically improve client outcomes if a transfer proceeds. They should consider the client’s circumstances and attitude to transfer risk if DB schemes offer larger CETVs, in the normal way.
- ‘Death Benefits will be better in a DC scheme.’
Firms must adequately consider how death benefits are provided by the DB scheme and the proposed DC arrangement throughout retirement. They should also consider alternative options, such as term life insurance and any tax implications.
- ‘My employer is going under, so my pension scheme will too.’
Firms are not experts in employer covenant assessments. Where clients have concerns about the sponsoring employer continuing in business, firms must provide a fair assessment of the benefits of the Pension Protection Fund.