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Guaranteed guidance on pensions choices will be provided by independent organisations rather than by schemes or their providers, the government has announced following consultation on this year’s Budget announcements.
News measures will allow individuals to transfer from private sector defined benefit (DB) schemes to defined contribution (DC) schemes, subject to two safeguards:
Guaranteed guidance on pensions choices will be provided by independent organisations rather than by schemes or their providers, the government has announced following consultation on this year’s Budget announcements.
News measures will allow individuals to transfer from private sector defined benefit (DB) schemes to defined contribution (DC) schemes, subject to two safeguards:
- a requirement to take advice from an impartial financial adviser regulated by the Financial Conduct Authority (FCA) before a transfer can be accepted; and
- guidance for trustees on the use of their existing powers to delay transfer payments and take account of scheme funding levels when deciding on transfer values.
An override will be introduced so that schemes can offer individuals flexible access to retirement savings, and tax rules will be amended to allow providers to develop new products tailored to the needs of individual consumers.
Guaranteed guidance – as opposed to advice – will be offered free of charge by bodies including the Pensions Advisory Service and the Money Advice Service via the web, phone and face-to-face meetings.
Hargreaves Lansdowne welcomed the opportunity to switch from private sector DB schemes to DC schemes, but the investment services firm’s head of pensions research, Tom McPhail, said, “For the majority of scheme members, the best advice is to not transfer.“The cost of getting good advice will be hundreds, or in some cases thousands, of pounds, so investors should think carefully about whether they really want to give up their scheme guarantees before paying an adviser to look into it.”
Simon Taylor, a partner at independent actuaries Barnett Waddingham, said companies will have to look at the choices their schemes offer.
“There is a significant danger that members will transfer out of DB schemes without strategies in place to mitigate the risks they are taking on: inflation, investment, and longevity.
“Employers may also see low take-up rates for such options, resulting in net losses instead of savings, if members are confused about how to manage their funds through retirement and therefore reject the option,” Taylor added.
