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Tenet: How to best manage the DB transfer window

Defined benefit pension transfers continue to be in the spotlight following the FCA’s recent consultation on pension transfer advice.

One thing that is not changing is the three-month window of opportunity customers and advisers have to complete the DB transfer, in order for the pension provider’s guaranteed cash equivalent transfer value to be honoured.

While there have been calls for the guarantee period to be extended to six months, the actuarial community has not unreasonably pushed back, arguing that six months creates too much of a liability exposure, especially in volatile and uncertain market conditions.

So what can advisers do to mitigate risk and manage customer expectations?

Although it is no doubt an oversimplification, from our experience customers tend to fall into one of two camps. Those that are seeking advice prior to obtaining a CETV and those that seek advice having obtained a CETV – with many customers having more than one DB pension to consider.

If as their adviser you have an ongoing relationship with a client and through that relationship you are aware of their retirement aspirations, then you are in a much better position to control the process and manage the customers’ expectations in terms of likely timeframes.

As the three-month window of opportunity only starts once the CETV has been obtained, it is key not to request the CETV until after you have gathered much of the usual fact-find information.

Since pensions freedoms were introduced, interest in DB transfers has skyrocketed through a combination of historically high transfer values, herd mentality (my mate down the pub did it) and an irrational desire for customers to get their hands on the cash so they can invest it, sometimes in a bank account because this is then more “real” to them.

So unfortunately, in many instances, the customer obtains a CETV from their provider and leaves it on the side table for a few days or even weeks before locating an adviser who is willing and able to provide advice in this area. And all the while the clock is ticking down to zero. So what can be done?

First and foremost, it is critical to manage a client’s expectations, as failure to do this at the outset is the single highest cause of most complaints.

Advisers should ensure their customer understands the services you will provide, the cost of the services, the detailed steps and information needed and why, before a personal recommendation.

They should also make it clear that at the end of the process a transfer may not ne recommended. If you will not execute transfer business on an insistent client basis and you have established at outset  they would go against your advice, you may decide it would be better for both you and the client not to work together.

Importantly, advisers should make it very clear there is no guarantee the transfer can be transacted within the remaining timeframe and the consequences of time running out. For example, the transfer could still take place but at a different lower value and/or the need to pay for another CETV, presuming of course the provider is willing to supply one.

The most obvious and common reasons for delay are associated with the time it takes for trustees to respond to any additional information requests, but these are not the only potential sources of delay that should be factored in.

Many firms outsource advice on DB transfers and a DB transfer with a CETV of over £30,000 must be signed off by a pension transfer specialist. With demand skyrocketing, these resources are in short supply so you should check capacity before committing in either area. Additionally, if you have an insistent client that you are willing to work with then you will effectively need to go through the suitability process twice (see the FCA’s factsheet 35).

At some point in the future we may see some standardisation of information that providers and trustees have to provide to customers and their advisers. This would undoubtedly streamline the existing transfer process.

But in the meantime, the key message is to manage customers’ expectations and where possible get ahead of the game through an understanding of clients’ retirement aspirations.

Simon Thomas is head of policy at Tenet



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  1. The one issue that would assist the whole process greatly is if the FCA and TPR could get together and agree that all the information we as advisers need to have to be able to correctly and compliantly advise the client is automatically included in the CETV pack that is issued to clients.
    Typically we see about one-third of the information required is included; we then send a detailed information request to the Scheme Administrators, who provide about half the missing information; we then contact them again to politely point out their basic lack of reading skills; and often have to resort to a final phone call when they still miss out some of the information for the third time!!!
    Is it really too much to expect of the two regulators that they cannot agree such a vital protocol?
    Stop sniggering at the back there!

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