Nearly 40 per cent of companies do not offer support to employees transferring out of their DB scheme, research by Jelf Employee Benefits has found.
According to a poll of audience members at a recent Jelf Employee Benefits employment seminar, 39 per cent said their organisation offered no support to employees regarding pensions transfers, while 28 per cent stated their company provided ad hoc staff workshops on pensions.
A further 13 per cent provided pensions workshops for all staff, while 10 per cent of respondents’ companies offered financial planning for all, and 4 per cent provided financial planning for senior members only.
Speaking at the event, Mercer Jelf Financial Planning financial planning consultant Peter Matthews described the rise in DB-DC transfers as the “next mis-selling scandal”.
He described a “perfect storm”, facilitated by growing individual awareness of the ability to transfer, them wanting the cash, legislative drivers encouraging transfers and very high current transfer values.
Matthews added that press headlines advising now to be the time to cash in a DB pension and to use pensions like a bank account is also encouraging moves out of DB schemes, but that it will be “these same papers that will then be calling this a pensions mis-selling scandal”.
According to Matthews, the popularity in transfers is being driven by the “lure of flexibility” but at the price of a loss of a guaranteed income for life for both the individual and a spouse, with added investment risk to manage. This is why he stated the FCA’s recommendation that advisers’ starting point that a transfer will not be suitable for their client “is a pretty good benchmark”.
Instead, he stated that transfers are “horses for courses; it’s got to be the right thing for the individual to do”.
According to Matthews, transferring out of a DB scheme may suit those with shorter life expectancy, those that are unmarried or those in a civil partnership with a pension that does not offer spousal support to a civil partner, or those in a distressed DB scheme.