At Jane Smith Financial Planning we have already embraced providing advice to transfer DB benefits to some clients whom we’ve assessed to have the relevant objectives, a suitable risk profile and capacity for loss, a clear understanding of the benefits which they will be giving up, and who are aware of the disadvantages and advantages of transferring their DB scheme benefits.
We have dealt with many reasons why clients want to transfer and in certain instances we felt these were justifiable, even where critical yields were unlikely to be matched by the new plan's underlying investments. Examples are clients with other sources of guaranteed income for life, who wanted more flexibility over some of their pension monies, possibly to use earlier in retirement when they’re fit and healthy or those who wanted to provide better death benefits for family members, especially where they are not married or in a civil partnership.
I therefore found it refreshing to read that the FCA has stated DB transfer advice maybe shouldn’t now start from the assumption that a transfer will be unsuitable, but should be more about ‘personal recommendations’.
In certain cases I have advised that the client’s objectives will be better met by transferring rather than retaining their DB scheme benefits, but equally there are those clients who have come to us with a very clear objective of transferring (clearly enticed by some very attractive looking transfer values) who we have then told that they should not do so.
We are certainly in the camp of not implementing any execution-only instructions, nor will we implement when we do not see it in the client’s best interests, and certainly this has to be part of a much wider advice and Financial Planning process. How can we limit advice to this single matter? We need to understand the client’s full financial position, both now and in the future, their objectives, concerns, risk attitude...
Of course we all know that in many instances retaining DB benefits will continue to be the most suitable option. However, it is good to see the proposed change from what we feel is a now out of date default assumption that all clients with DB benefits are best staying in the scheme, backed up by sometimes largely irrelevant critical yield data from TVAS reports which can be amplified by sometimes error-ridden free TVAS reports produced by third party providers!
It will be interesting to see what the FCA comes up with in regards to TVAS’s replacement – let’s hope it’s more relevant in terms of today’s flexible retirement market rather than the old-fashioned assumption that everyone will, at some point, purchase an annuity.
I’m also curious to find out what the FCA’s guidance on the role of pension transfer specialists will be? Will they ask for more relevant qualifications? I note the CII are removing AF3 from their syllabus to be replaced by two new AF exams ‘Pension Transfers’ (part of their new ‘Certificate in Pension Transfer Advice’) and ‘Retirement Income Planning’. Or perhaps they will introduce compulsory annual CPD, maybe via workshops or online testing, for all Pension Transfer Specialists?
Whatever happens, I believe most advisers will welcome the new guidance which will hopefully provide a far clearer pathway to providing our clients with the best and most suitable advice to meet their individual needs, objectives and circumstances.
Nicola Watts APFS Chartered Financial Planner, Chartered Wealth Manager, CFPTM Chartered FSCI - director of Jane Smith Financial Planning
After joining the family business in 2000, Nicola qualified to provide advice in 2001, and has been a director of the business since 2006. Since the retirement of her mother (Jane Smith), Nicola bears sole responsibility for the management of the firm, and the advice provided to clients. Nicola is married to David and has two young children, Emily and Olivia, and Poppy the black labrador.