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DB pension schemes looking to bring in IFAs to help with ‘freedoms’

22 October 2019

Over a third of defined benefit pension schemes have appointed or are considering appointing an adviser to help their members better navigate the pension freedoms, according to XPS Pensions Group.

Research published by the pensions group found an increasing number of trustees and sponsors are looking to provide more support to help their members with retirement decisions, following a rise in the number of people seeking to transfer out.

It showed that 10% had already appointed an adviser, with a further 25% actively considering appointing one.

Simon Reddish, senior consultant and head of IFA selection team, XPS pensions Group, said: “Freedom and choice has been a game changer for the pensions industry. We are seeing a growing number of trustees and sponsors looking to provide more support to help their members.

“The increased level of knowledge and access to professional advice means that trustees and sponsors are in a much better position than their scheme members to select an IFA and I think doing this can meaningfully improve member outcomes and protect schemes.”

XPS warned that by doing nothing, trustees and sponsors could leave members exposed to the risk of receiving poor advice and possibly even falling victim to a scam.

To ensure members receive the most appropriate advice, XPS said DB schemes should be looking for independent advisers, with the option of a low cost, simple arrangement that is not high in investment or advice fees.

It also said there should be no commission or other incentives paid to the adviser for promoting specific products and no contingent charging structure in place.

Helen Ross, head of member options, XPS Pensions Group, commented: “We’ve found our annual member outcomes research has been very powerful in highlighting the risks facing members and what could be done to mitigate these. Often this hasn’t been thought about by trustees or sponsors before.”