I have spent my whole
career in financial services wondering what the next
big reveal will be. It is a
bit like flares on trousers:
never throw away “trendy” clothes because, as sure as eggs are eggs, what goes around comes around.
You see, I am a victim of the original Pensions Review back in the early-90s, having been a young adviser at a firm which specialised in pension transfers. It just so happens you could not have met a nicer, more diligent, hardworking and ethical bunch if you tried.
We mostly dealt with one particular employer that, back then, had no death in deferment (yes that is correct) and no early retirement, yet we were nearly ruined by the incredible assumption that all transfers were bad. You know the rest. Or do you? I fear some memories are either fading or too young.
I said back then and I will say again (current ludicrous lifetime allowance rules aside) that not all transfers are a bad idea. I was roundly ignored so took it upon myself to try and explain, from time to time in these very pages, why that was not always the case. Of course, it was wasted energy but I found solace in having an outlet for my frustrations.
So here we are again, many years later, with equally compelling reasons why some of our clients might like to consider transferring their defined benefit pensions.
Our suitability reports back in the 80s and 90s were modest works of art, with genuine and considerable efforts made to explain why we thought a transfer might work out best for them. The net result was unfortunate to say the least, with people being able to employ selective memories to suggest various issues had been misunderstood.
Fast forward 20 years or so and the very same people are now wondering if their complaint back then was quite so wise with new-found flexibility and inheritance treatment (not to mention health and marital status issues).
So it is with great enthusiasm that I suggest the current wave of adviser fear and doubt over this very uncertain topic is most definitely a sensible mindset to engage.
Of course, I have to pinch myself when, after all that, I still seem to think the best result for some clients is to grasp what appears to be a once-in-a-lifetime opportunity and transfer away from their “secure” world of DB.
You only have to ask those people with benefits in perhaps less-than-stable companies if they feel totally secure?
And just look at the current requirement to provide a transfer value analysis to realise how muddled this has all become. A transfer value analysis is a piece of paper that tries to tell someone how much one variable benefit will compare to another even more variable benefit by suggesting they buy something they have absolutely no intention of buying. But – big sigh – we still get them done because we have to.
So this time round we are picking our clients even more carefully. I am drawing upon my years of experience, disappointment and anger, and explaining in more ways than one how this might pan out.
And I am backing it up with various cashflow models to prove we have done absolutely everything in our powers to tell the whole story openly, honestly and with the utmost desire that it is for their potential benefit and not ours
that we do this.
Tom Kean is director of Thameside Financial Planning