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Triage would ease DB pensions transfers advice bottleneck, say advisers

24 September 2018

Advisers have come out in support of a triage process offered to clients ahead of receiving advice on defined benefit transfers, in an effort to help ease the advice bottleneck.

Research by insurance and pensions giant Aegon found 56% of advisers would back the FCA introducing such a process.

A triage service would aim to offer information and guidance to clients considering seeking advice on DB transfers, without it being considered as a personal recommendation.

Aegon is championing the idea of a ‘traffic lights’ triage system, whereby clients ask themselves a series of questions with each answer being given as either a ‘red’, ‘green’ or ‘amber’ score. Those individuals with a largely green score would be told they might benefit from seeking advice, while red would indicate the opposite.

The research also showed that adviser support for some form of contingent charging was equally strong, to avoid making the advice gap around DB transfer advice even greater. Over half (56%) of advisers, across both those who are active in the pension transfer market and those who are not, believe the FCA should allow contingent charging.

The regulator is currently exploring if contingent charging can be successful without biasing advice recommendations, following calls from the Work and Pensions Select Committee to ban it.

Steven Cameron, pensions director, Aegon (pictured), said: “Advice on DB transfers is complex and inevitably comes at a significant cost. With the FCA continuing to stress that for most people, transferring will not be suitable, it’s important that advisers can help clients identify whether or not it is likely to be worth their while seeking advice.

“We’re pleased the FCA has so far kept an open mind on whether contingent charging can continue for DB transfer advice. It’s vital that the FCA avoids measures which will further widen the advice gap in a market where demand for advice far exceeds supply.”

Despite efforts by the FCA to make clear its expectations around what constitutes good advice for DB transfers, Aegon’s research found just 44% advisers said the rules are clear enough. A substantial 35% disagreed with this statement.

Cameron added: “With regulatory scrutiny of past advice continuing, we need to ensure advisers have clarity and regain confidence to meet pent up demand for advice in this area. I believe the FCA has offered welcome clarity which should remove the risk of advice being found unsuitable. Professional Indemnity Insurers need to be shown that for future advice, there is no justification for inflated premiums.”

The following table sets out some of questions devised by Aegon, which may help clients decide whether or not to seek advice on transferring from a defined benefit or final salary scheme – for illustration only.

Professional Paraplanner