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Alistair Cunningham: Lessons from the Great Pension Transfer Debate


The fact that fellow financial planner Al Rush could organise an event on defined benefit transfers in a little over two months, in the middle of nowhere, and fill it with in excess of 250 pension professionals on one of the hottest days of the year is evidence of the attention and concern this topic is gathering.

Al filled the day with the diverse views of a dozen different speakers, including Rory Percival, who underscored the reason many of us are concerned: the FCA is currently looking at up to 100 firms as part of its work into DB transfers. While he was not as explicit, this would appear to have all the trademarks of thematic review.

Figures from Royal London policy director Steve Webb highlighted the magnitude of the issue, and in many respects the poor understanding of potential transferees.  “Large cash equivalent transfer values” were quoted as the second most popular reason for transferring, with inheritance considerations coming in third. The first reason is largely nonsense, as transfer values are necessarily fair, and reflect market conditions. As John Ralfe stated earlier in the day: “People should not be fooled into thinking that by cashing in their pension fund they are financial geniuses.”

I asked Webb, given his five years as pensions minister, whether he thought pension freedoms and particularly inheritance was a good reason to transfer, given the instability in pensions legislation.

His view was change is unlikely to be retrospective – the Government lacks a majority, and it would not take much to have a government with a very different political outlook in the next five years. With life expectancies measured in decades, the certainty of pension freedoms does not seem a good reason on which to base a transfer.

For me, the single most worrying piece of information from the day was that an estimated 25 per cent of transfers are going overseas. Among yesterday’s audience of pension professionals, a number told tales of non-UK companies using passporting rights to give dubious advice (and I use this word reservedly). I thought I had seen the worst of communications on this topic, but I have only looked at UK domiciled firms. Put this in the context of the 80,000 transfers in the last twelve months alone and the picture looks pretty grim.

I suspect we have started to see the tip of the iceberg on DB transfers, which is better than the lack of awareness we had historically.

It is positive the FCA has stepped up its investigations on this matter. I understand  the regulator should publish more on this topic shortly, but I suspect there will be no change in its. stance that a DB transfer is unlikely to be suitable. I happen to agree with view: a transfer is not in most individual’s best interests, and a comparison must be made of the guarantees they might be giving up on a like-for-like basis.

Whatever the outcome, the firms who attended the Great Pension Debate and others will, in the main, continue to do the right thing by their clients. But it is important to note that in organising this event, Al Rush has provided a great example of advisers going above and beyond, and seeking to influence the pensions profession in a positive way.

Alistair Cunningham is director of Wingate Financial Planning



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There are 4 comments at the moment, we would love to hear your opinion too.

  1. I happen to disagree with the FCA stance as nobody knows whether retaining or transferring out of a DB scheme is the right thing to do until the research has been done and the Client objectives understood.
    What do I know? Govt, allows people to gamble up to £50,000 in Premium Bonds on the basis that people think there money is ‘safe’. I feel sorry for anyone who has not won anything much for 10 years and where inflation has eaten into the capital value.
    The FCA should start to look at the so called ‘safe’ cash investments that are now being badly damaged by inflation (2.9%?) due to the greed of the relevant provider. (incl NS&I)

  2. Terry Mullender 21st June 2017 at 7:47 am

    Not guarantees Alistair, promises. Promises that may not come to fruition if the sponsoring employer fails, or if the legislation around revaluation and escalation of deferred pension benefits changes as it surely has to.

  3. I too share Alistair’s concern over the 25% of transfers going overseas, although some will of course be good advise where the individual is perhaps a foreign national who has returned home (e.g. US citizen) or a Brit who has decided to retire to certain countries (e.g. Australia).

    • Christopher Lean 21st June 2017 at 8:43 pm

      I have concerns about those advised to transfer to places like Malta, while US resident. The IRS do not treat this as a rollover and if there are no foreign tax credits, there could be tax charged. This is nothing to do with the OTC mentioned in the Budget.

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