AN advice firm has reported an increase in enquiries from clients concerned about the stability of their defined benefit (DB) schemes.
According to Killik & Co, a higher than usual number of savers have asked for help on their DB pension, citing concerns about the financial security of their employer amid the Covid-19 pandemic.
Svenja Keller, head of wealth planning, said this was particularly true for some industries which have been severely impacted by the lockdown, such as travel.
Ms Keller said: “Those with larger pension entitlements are understandably concerned about this – if their employer went bankrupt, the scheme may end up in the Pension Protection Fund, but in most cases benefits are capped and inflationary increases tend to be less generous.”
The worry among savers has left them questioning whether they should transfer out of the scheme and take a lump sum instead of their guaranteed income for life, Ms Keller said.
She added: “As interest rates are still at record lows, the lump sum option may seem attractive as it could mean a larger transfer value. However, it’s crucial to get advice with a reputable firm – and getting advice is a requirement if the transfer value is over £30,000 or over.”
The market experienced a sharp decline in DB transfer enquiries at the end of March when Covid-19 first hit and the nationwide lockdown took hold.
However, it is now showing signs of recovery and is expected to grow further in the coming months as financial pressures caused by Covid-19 will lead more over-55s to seek access to their funds.
For example, at the end of May, out of the 81 DB schemes administered by LCP, 34 received transfer requests. This compared with an average of 21 requests per week between the lockdown announcement on March 23 and the gradual lifting of restrictions announced on May 10.