Seventy nine per cent of financial advisers disagree with using annuities as the basis for Transfer Value Analysis assumptions to assess defined benefit to defined contribution pension transfers, according to research by AJ Bell.

Research carried out by the firm found that this is because of the pension freedoms introduced in 2015. AJ Bell noted that with more people opting for income drawdown post pension freedoms, those critical yield figures are no longer the only factor; some people might place a higher value on being able to access their pension early or in a more flexible way and for others the generous DC death benefits may be an attraction.

The research precedes a consultation due to be released by the Financial Conduct Authority on Wednesday 21 June, and is part of a review into the processes of individual advice firms, which have resulted in some of them ceasing to advise on DB transfers.

AJ Bell found that 80 per cent of advisers questioned said they are still advising on DB transfers and so urgent clarification is needed from the FCA on whether it plans to update the current guidance available to advisers.

Commenting, AJ Bell head of platform technical Mike Morrison said: “It is slightly mystifying that the FCA has not yet confirmed the full scope and timetable for its consultation on DB transfers but hopefully we will get more clarity this week. The volume of activity around DB transfers is higher than it has been for years and the regulator is clearly looking closely at some firms, but then it is leaving the majority of the market to operate in a bit of an information vacuum.

“The ghost of the 1990’s misselling scandal is clearly hovering all over this but that focused just on transfers that went ahead when they shouldn’t have done. Avoiding that is just as important today, but we now face an equally problematic situation – transfers that should go ahead but don’t because of fear of regulatory sanction. That is also a poor customer outcome.

“Advisers urgently need some clarity around what the FCA expects of them. This must cover the FCA’s current stance on DB transfers post pension freedoms, the TVAS assumptions which are now hideously outdated and expectations around the advice process and charging options.

“A lot of the DB transfer process can be affected by behavioural bias. Post RDR we must remember that “advice” is the product and that advice not to transfer could and will be for many the most suitable outcome. This is particularly relevant where advisers are operating any form of contingent charging.”

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