Couple calculating their defined benefit pension

Why is independent advice on DB transfers so important?

In Defined Benefit, News by Wealth of Advice

Why is independent advice on defined benefit transfers so important?

Why you should talk to an impartial adviser before taking any action.


Since George Osborne introduced his groundbreaking reforms two years ago, retirees have been afforded an unprecedented amount of options regarding their pension pots. With this newfound power comes great responsibility, which begs the question: how important is independent, impartial advice when considering a defined benefit transfer?

It is important to consider just why companies are offering highly attractive sums to scheme members in the hope that their workers will opt to transfer out. According to the latest statistics, the deficit in FTSE 350 companies’ pension funds widened significantly last year, accounting for 70% of the firms’ annual profits.

This context is key to understanding why these businesses are now offering large amounts of money to those who belong in a final salary pension scheme. These schemes effectively guarantee workers a set amount of money in retirement per annum.

Significantly, these payouts will continue for as long as the retired worker lives. With life expectancy creeping up year on year, defined benefit schemes are proving very costly indeed for businesses, who have started to feel the pinch in recent years.

Therefore, it is in a firm’s best interests to try and reduce their deficit by offering eye-watering lump sums to employees. Naturally, these are appealing to many retirees – but is accepting such an offer the right move for them?

The Work and Pensions Select Committee has grown increasingly concerned that companies are appointing advisers to convince employees to transfer out, regardless of their personal circumstances and liabilities.

The Committee chairman, Frank Field, told New Model Adviser: “I think this is a treacherous area for people and if they are going to make a move they really need independent expert advice and not salesmen sent along from the company. So this is something we will be looking at.”

Before thinking about transferring out of a defined benefit pension, employees must weigh up a number of different factors, says Chris Breward, Managing Director at Wealth of Advice.

“Transferring out may be appealing, particularly with some of the sums being touted in the media, but it’s important to consider the bigger picture,” says Chris. “A transfer may not be suitable for everyone; unique financial circumstances and life goals must be taken into account. Can company-appointed advisers really provide impartial advice?”

Instead, many experts are stressing the need for retirees to take impartial counsel from independent financial advisers. Wealth of Advice are proud to be independent, offering advice tailored to our client’s lifestyles, targets and financial situation. To find out whether transferring out is right for you, talk to us today.


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