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‘DB deficits offer opportunity for advice’

A-Day rule changes present a major opportunity for advisers with clients whose defined-benefit pensions are facing deficits, says Skandia.

It says 26 million members of DB schemes could face shortfalls and will need advice. Figures from the UK Pension Trends Survey 2005 show that 89 per cent of DB schemes were in deficit in 2005.

Concurrency rules which were introduced on A-Day enable clients to invest in separate personal pensions if they are concerned about what they will receive from their DB scheme.

New disclosure rules brought in by the Pensions Act 2004 also mean that clients must be informed by September 22, 2006 of the estimated amount that would be needed to ensure that all benefits are paid in full if the scheme winds up.

Skandia says this gives advisers the opportunity to step in. It says advisers need to assess the strength of the defined-benefit scheme and the size of any deficit, how effective the stated recovery plan is likely to be in addressing any deficit, whether clients are saving enough to meet their retirement goals and the most appropriate funding solution for the future.

Pensions marketing manager Nick Bladen says: “It is essential that clients seek advice to determine whether or not their pension has a chance of living up to expectations and, if it does, whether that will truly be enough to fund their retirement.”

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