WEALTH at work, a leading provider of financial education, guidance and advice in the workplace is calling for more to be done to protect defined benefit members from the risks around pension transfers.
In 2017 defined benefit (DB) pensions hit the headlines and failures involving BHS, British Steel and Carillion brought member support under the spotlight.
The Work and Pensions Select Committee described a number of ‘dubious’ financial advisers as ‘vultures’. This followed much scrutiny of the closure of the British Steel Pension Scheme and transfer of pensions to alternative schemes, with much of the advice given to members being deemed unsuitable by the FCA. The FCA has since revoked or accepted the voluntary suspension of transfer advisory permissions from several firms and announced a data collecting exercise from firms holding pension transfer permissions.
Elsewhere ‘high’ transfer values are seeing other DB scheme members transferring to DC pensions, and inheriting the risks involved in managing pension savings and retirement income.
Jonathan Watts-Lay, Director, WEALTH at work comments; “The British Steel situation in particular has flagged a big gap for me; although information was available including a helpline and website content, in the main members were left alone to find help despite the pensions regulator ‘urging’ the Trustees to talk to members about the importance of obtaining financial advice.”
He adds; “But this doesn’t have to be the way. Employers and Trustees have access to professional advice from consultants and buying power and so are perfectly placed to facilitate access to a breadth of services including financial education, guidance and advice to help employees and members fully understand their pension scheme options, and the risks. This approach also comes with the benefit of having agreed pricing for services rather than leaving members to guess whether they are paying appropriate fees.”
Watts-Lay comments; “This service would ensure that any financial advice provided is by a firm who has been subject to thorough due diligence including ensuring robust compliance process checks – not only in complex DB cases, but as an everyday option. There is plenty of evidence that these services help members get better outcomes.”
He comments; “And whilst there are some employers and schemes doing this now – they are in the minority and it is time it was the norm. After all, being picked at by vultures is hardly a good member outcome.”