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Govt to mandate advice for DB to DC transfers

Employers will be required to fund independent regulated financial advice for some savers transferring out of defined benefit pension schemes, Chancellor George Osborne has announced.

The Government will set out details of its pension reform agenda later today, part of which is a requirement for regulated financial advice before savers move from a DB scheme to a DC scheme.

In a ministerial statement released this morning, Osborne says: “The Government intends to make it a statutory requirement on the transferring scheme for all individuals who are considering transferring out of a defined benefit scheme to take advice, from a professional financial adviser who is independent of the defined benefit scheme and authorized by the Financial Conduct Authority, before transferring.

“In most cases the individual pension member will need to pay for the financial advice. However, the responsibility for paying for the financial advice will fall on the employer if the transfer is from defined benefit to defined contribution schemes within the same scheme, or as a result of an employer led incentive exercise.”

The requirement for advice ahead of transfer will not apply to pots worth less than £30,000.


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. I can see this working really well for clients!

    Hello Mr Adviser, I’d want to take all my DB fund as a lump sum please, but I need you to give me some advice before I’m allowed to do it.

    Okay Mr Client, that will be £1,250 please. Thanks for that, we wouldn’t advise that you transfer out of the DB scheme as it is a daft idea, the critical yield is 9%, or 15% if you take it out as cash and pay tax on it, also you will inevitably complain in 5 years time once markets have fallen or you have spent it all and you realise that the income that you would have received would have been far higher if you had stayed in.

    Thanks for the money, next.

  2. Quietly resigned 21st July 2014 at 1:52 pm

    ‘No advice needed under £30,000 pot size…’ So which providers will be accepting DB transfers without any evidence of advice? This looks messier by the minute.

  3. Bethell Codrington 21st July 2014 at 3:03 pm

    The only way this will work is if ceding schemes have to demonstrate that they have seen the FCA Qualified Advice, checked it is genuine, and have ia copy on file. This would also need to be mandated for all DB transfers whether within UK or to a QROPS.

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