FT Adviser (15/08/2019) – Defined benefit transfers have seen the lowest take up rate in almost two years, which experts believe is linked to the introduction of the FCA’s transfer value tool.
Figures from LCP showed 23 per cent of savers who asked for a transfer value quote ended up transferring out in the last quarter of 2018.
This compared with 26 per cent in the previous period and 34 per cent in the third quarter of 2017, the previous high.
Take-up rates in the quarter up to December were especially low among younger members, LCP stated. Only 6 per cent of the quotes issued to members under the age of 50 were paid out, which compared with 20 per cent in the same quarter the previous year.
According to the consultancy, which based the figures on its 78 client schemes, this drop coincided with the introduction of new rules from the Financial Conduct Authority, including the transfer value comparator.
The TVC tool became a requirement under the pension transfer rules that came into force in October 2018 and shows, in graphical form, the transfer value offered by the DB scheme and the estimated value needed to replace the income in a defined contribution product.
On the other hand, Alan Chan, director and chartered financial planner at IFS Wealth & Pensions, agreed with LCP’s view on the TVC.
He said: “The assumptions used are very conservative which creates a very stark comparison with the benefits of staying versus transferring out and can put a lot of people off.
“This is only half the story though, as it coincides with lower transfer values which make transferring less appealing.
“The other issue is professional indemnity insurance and FCA scrutiny in the pension transfer market – for members under the age of 50 it’s a big ‘no no’, and many PI insurers will exclude these type of cases so firms are more cautious now and rightly so.”
Full article link: https://www.ftadviser.com/pensions/2019/08/15/experts-blame-new-rules-for-pension-transfer-decline/
