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How to overcome the problem with DB transfers

Defined Contribution (DC) pension schemes are alive with the sound of Defined Benefit (DB) transfers. Enquiries have sky rocketed because:

  • the DB Cash Equivalent Transfer Values (CETV) are so high, and
  • the Government has captured the public’s mood for unlimited access to their pension.

This sudden increase in demand highlights a problem with DB transfers that many advisers are struggling with. The problem is getting all the data you need.

Its hard work and time consuming to collate all the data from a DB scheme. The DB side of the industry is simply not set up to handle the high demands that are being placed on it. Until recently, DB transfer requests were rare. Experienced DB staff could handle these low volumes. It was a manual process that resulted in a high level of accuracy. Today that simply isn’t the case. Advisers are experiencing delays in getting the CETV and when they do receive it, regularly find inaccuracies or data missing.

When the DB scheme provides a CETV to a member, the value is guaranteed for three months. Therefore, the request to transfer the DB pension has to be received 3 months from the date the CETV was produced. Miss that date and the member could find that:

  • on recalculation, the CETV has gone down and/or
  • they have to pay for it to be recalculated (usually one CETV is provided free of charge every 12 months).

You could be forgiven for thinking that 3 months sounds like a long time. It’s a tight timeline with little room for manoeuvre because:

  • when you receive the CETV, other scheme data is missing which they need to chase
  • without all the data, you can’t consider & determine what the best advice is and,
  • you need time to meet the client to explain your advice.

As an adviser, how do you try to navigate your way through the data problems and tight timelines while making sure your clients get a good outcome?

Here are my 6 top tips:

  1. Act early. As soon as that CETV has been produced the clock is ticking. Do not delay!
  2. Put quality in. Make sure you have a thorough fact finding process to follow with the transferring scheme. Give the DB scheme the best possible chance of getting things right first time by asking clear, detailed questions.
  3. Get help. Work with an experienced TVAS supplier to support your analysis.
  4. Be persistent. Keep on top of the process to ensure nothing slips or is missed.
  5. Get quality out. Adhere to the conduct regulations, your training and good practice guides to ensure your clients get the right advice.
  6. Hit the deadline. Make sure everyone is aware of the CETV deadline.

For financial advisers only. Not to be relied on by consumers.

The views expressed by external contributors are not necessarily those of Old Mutual Wealth or Quilter International.

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