This blog is an update on one written in January, with additional information relevant to members considering whether to cash in the pension they have built up in a defined benefit pension scheme. It is important to read this in conjunction with the earlier blog.
Recent data shows that the level of funds transferred out of pension schemes continues to soar, hitting record levels in 2017.
However concerns about whether transfers out are in members’ interests and about the process underpinning transfers out persist:
(1) Critical report by MPs
In February MPs on the Commons Work and Pensions Select Committee called for urgent action because “another major misselling scandal is already erupting on defined benefit pension transfers”.
(2) Regulatory development
In March the Financial Conduct Authority announced that, in light of concerns about the significant proportion of unsuitable advice, they would still require advisors to “start from the assumption that a DB pension transfer will be unsuitable”. There will be further consultation covering issues such as whether contingent charging (where fees are only paid if transfers go ahead) should be banned.
These developments do not directly impact on the choices facing any individual. However, the concerns expressed by MPs, the regulator and others will hopefully emphasise the importance of a decision to cash in defined benefit pensions and the need to consider the issues very carefully.