Call to include partial DB to DC transfers in advice could result in challenging volumes for administrators
Standard Life has called for partial defined benefit (DB) to defined contribution (DC) transfers to become a mandatory part of the advice given to scheme members considering their retirement options.
Responding to the Financial Conduct Authority’s (FCA) current review of defined benefit (DB) pension transfers, Alastair Black, head of financial planning propositions at Standard Life said that a DB to DC transfer “doesn’t have to be all or nothing”. He said that a partial transfer would give individuals the option of freeing up some of their pension pot, without having to give up all of the guarantees offered by a DB arrangement.
Black welcomed the FCA’s current consultation, adding “We would like to see it go that bit further and use the opportunity to embed the value of partial transfers in the regulations, so that a partial transfer must always be considered as an option for consumers during the advice process.”
Paul Pettitt, managing director of pension technology providers Origo agreed that a partial transfer could combine the security of a DB arrangement with the retirement flexibility now offered through DC. But he cautioned that if partial transfers are sanctioned, it would drive up volumes of transfer requests and processing volumes, “adding further pressure on pension and third-party administrator systems, many of which operate manual processing of transfers, and where there are already processing issues and delays.”
Pettitt said that greater automation and improved standards would enable greater volumes to be processed more efficiently, more cost-effectively and with more measurable service levels.
Advice on DB to DC transfers in general continues to be under scrutiny, with the FCA banning two further firms (David Williams IFA and StrategicWealth UK) from carrying out transfers in the last two months.
However, Simon Chrystal, CEO of advisers UK Workplace Solutions criticised industry experts and the media for scaremongering around DB to DC transfers. While admitting that there have been rogue advisers, he said “to listen to some so-called pension industry experts continually crowing in the media, you would think that the whole sector is riddled with scandal. This is simply not a true or a fair representation of the facts.”