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Pension freedoms attract surge of transfer requests

Requests for DB transfers are rising, but consumers, and their advisers, should take heed of the risks.

Since the announcement of the pension freedoms in March 2014, interest in moving money from defined benefit to defined contribution schemes has increased. Our survey of 201 financial advisers found 81% reported an increase in requests for advice about transfers over the past year.

Consumers are attracted by high transfer values and the prospect of being able to cascade wealth through the generations. But customers should be wary of giving up the benefits of a guaranteed income for life. It is especially risky because they are transferring the investment and longevity risk from the scheme to themselves, which is irreversible once complete.

This presents financial advisers with a dilemma. 44% of advisers reported a rise in the number of insistent clients wanting to transfer even when it had been demonstrated that it was not in their best interest.

If a client insists on a transfer, advisers must make sure they follow the process outlined by the regulator.

Stan Russell is a retirement expert at Prudential. 

Since the announcement of the pension freedoms in March 2014, interest in moving money from defined benefit to defined contribution schemes has increased. Our survey of 201 financial advisers found 81% reported an increase in requests for advice about transfers over the past year.

Consumers are attracted by high transfer values and the prospect of being able to cascade wealth through the generations. But customers should be wary of giving up the benefits of a guaranteed income for life. It is especially risky because they are transferring the investment and longevity risk from the scheme to themselves, which is irreversible once complete.

This presents financial advisers with a dilemma. 44% of advisers reported a rise in the number of insistent clients wanting to transfer even when it had been demonstrated that it was not in their best interest.

If a client insists on a transfer, advisers must make sure they follow the process outlined by the regulator.

Stan Russell is a retirement expert at Prudential. 

Prudential research of 201 financial advisers nationwide.

Prudential research of 201 financial advisers nationwide.

Prudential research of 201 financial advisers nationwide.

Prudential research of 201 financial advisers nationwide.

Prudential research of 201 financial advisers nationwide.

Prudential research of 201 financial advisers nationwide.

Comment & analysis
Investment

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