Morrison: Transfers 'normalise' need for pensions advice

Many years ago (as some of the best stories begin) when I was working for Winterthur Life, I undertook a series of talks around the UK. The title of these talks was something like “The Quantitative versus the Qualitative issues of defined benefit transfers” (A snappy title I hear you say!) In the talk I went through some of the Quantitative aspects on critic yield and TVAS and then looked at the Qualitative (Lifestyle) issues with a view to building a picture and prioritising the key issues. So here we are (quite) a few years later still looking at the same subjects and issues. A lot of the details are as they were and should be looked at as retirement considerations. However, retirement has changed and the pension freedoms have changed our perception of how we can spend our money. The most fundamental changes can be summarised as: • The Pension freedoms allow DC funds to be withdrawn and spent for whatever reason on attainment of age 55, there is no need to buy a guaranteed income. At the same time we are telling people with very high CETVs under DB schemes that a guaranteed income is perhaps the most important transfer consideration. However much this is correct, people see the bank balance.• Advisers have heard of or experienced retrospective regulatory interventions which, seen together, seem to show a whole lack consistency. They are anxious that this might happen again. • We have also had RDR which has perhaps led to Financial Planners wanting to offer a full service, while potential customers often think they want just one transaction. DB transfers generally need a full consideration of all a client circumstances but whether they need an ongoing management service is a moot point? Add in a requirement for advice on a potential DB transfer and we create the commercial mismatch that we have today. Consumers need confidence in the service they get from advisers and the feeling that they are paying a reasonable amount for the advice. Advisers need confidence in the Regulator, a confidence coming from certainty in the future and clarity today. Who knows, the regulatory certainty could even be reflected in the fees charged for the advice. As long as there are defined benefit pension schemes, there will be the demand to transfer and this is a great opportunity to “normalise” the need for financial advice. This normalisation process however will need the co operation of consumers, advisers and regulators. Mike Morrison is head of platform technical, AJ Bell

Morrison: Transfers 'normalise' need for pensions advice

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