Advisers expect demand for pension transfers to increase by a third | Old Mutual Wealth
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Advisers expect demand for pension transfers to increase by a third

15/06/2017
  • Results from a survey of international financial advisers (including UK advisers) shows demand for defined benefit pension transfers expected to increase by a third on average
  • Top reason cited was fear that the defined benefit scheme will not be able to meet its long term liabilities

A survey[1] conducted by Old Mutual International, part of Old Mutual Wealth, shows the extent to which financial advisers expect defined benefit (DB) pension transfers to increase and that high levels of scheme deficits are fuelling this demand.

The survey shows 42% of financial advisers globally have seen a rise in demand for DB pension transfers in the last 12 months, and 35% expect demand to continue to increase in the next 12 months. UK advisers have experienced the biggest growth in demand, with 83% saying they had seen an increase in demand in the last 12 months (54% saying they had seen a ‘significant increase’ in demand) and 71% expecting demand to increase in the next 12 months.

Advisers were also asked to predict the amount by which this demand will increase in the next 12 months; advisers across all regions expect this demand to increase by an average of a third (33%).

67% of advisers say the increase in demand is fuelled by the fear that the DB scheme will not be able to meet its long term liabilities and 66% believe the improved transfer value/ critical yield is a factor. This compares to 58% who say the increase in demand is driven by the pension freedoms. UK advisers place more emphasis on pension freedoms as the main driver, with 91% saying this was a reason for the increase in demand.

The high DB scheme deficit of £784bn[2] and the record low gilt yields are understandably causing concern. Combined with the relatively high transfer values and it is easy to see why the demand for transfers has risen. However, financial advisers must ensure each case is carefully considered before carrying out a transfer and that they have the appropriate permission from their regulator to conduct such transfers. Pension transfers away from DB schemes are irreversible, and may not be suitable for all clients.

The recent DWP Green paper on the ‘Security and sustainability in defined benefit pension schemes’ may help to reassure some scheme members that the Regulator is reviewing this area of activity to ensure the longevity of defined benefit schemes and the protection of its scheme members.  Conversely, the paper may also raise some concerns given one option to maintain affordability is for ‘schemes to reduce liabilities, perhaps by reducing benefits, or restructuring exercises’.

David Denton, Head of International Technical Sales, Old Mutual Wealth, comments:

David Denton“UK based advisers have previously been fairly cautious when it came to defined benefit transfers, as decisions were seen as high risk and irreversible.  With 71% of UK advisers saying they expect demand to increase, we may be seeing the tide turning, with more advisers prepared to take on such cases.  It is important advisers continue to assess each case on its own merits as defined benefit transfers will not be suitable for all clients.

“Following the Election in the UK, with the Conservatives now operating a minority Government, pension issues are likely to have slipped down the agenda. There is a risk the response to the Green Paper could be pushed out, but the area of defined benefit pension funding and transfer suitability remains a crucial issue and it is important this remains on track.”

 

[1] Old Mutual International adviser survey, May 2017, 210 respondents from across the UK, Europe, Middle East and Asia.

[2] Purple Book: http://www.pensionprotectionfund.org.uk/Documents/Purple_Book_2016.pdf - figure based on full buy-out so takes account of all liabilities, p.23

For more information contact

Sophie HeywoodOld Mutual Wealth02380 91677007834 499558sophie.heywood@omwealth.com

Notes to editors:

About Quilter plc:

Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Quilter plc oversees £116.5 billion in customer investments (as at 30 June 2018).

It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and the Multi-asset investment solutions business.

The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:

• The Multi-asset business is now Quilter Investors

• Intrinsic to Quilter Financial Planning

• Private Client Advisers to Quilter Private Client Advisers

• The UK Platform to Quilter Wealth Solutions

• The International business to Quilter International

• The Heritage life assurance business to Quilter Life Assurance

• Quilter Cheviot will retain its name

This press release is for journalists only and should not be relied upon by financial advisers or customers.

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