“The new guidance for trustees to warn DB members of the risks of transferring during the pandemic is welcome as it is vital that pension savers do not do anything drastic with their nest egg and consider the options available to them very carefully.
“The sudden change in the economic landscape has created an environment which could tempt many DB pension holders to transfer to a DC pension. The fluctuations in bond yields and investment markets has increased potential transfer values, and many will be tempted by the opportunity to invest their retirement pot in a depressed market.
“But the economic outlook is still extremely uncertain, and the relatively high transfer values should not be an automatic reason for a member transferring out. The guaranteed income from a defined benefit scheme should not be downplayed and a transfer will only be in a members best interest in the minority of cases.
“Scammers are also taking advantage of the unprecedented environment to try and tempt savers away from their retirement funds. The FCA has warned consumers who are scammed lose an average of 22 years’ pensions savings, almost three times their annual earnings. Unsolicited cold-calling about pensions has been made illegal, but the risk of pension scams remain.
“If members are still leaning toward a transfer, they must remember that in doing so they take on the investment risk, which is particularly challenging in the current market uncertainty. Even if members have a professional adviser, who carefully selects and monitors their funds, the volatility within the markets will have an impact.
“It is also worth remembering that the money isn’t accessible right away. The pension transfer process can take months and The Pensions Regulator has recently relaxed some of its requirements on schemes so transfers may take longer, or it may take longer to get a quote for the value of that pension.”