Pension schemes urged to offer partial DB transfers

In Industry Insights by woateam

Royal London has called for more pension schemes to offer partial transfers after a survey of advisers found five in six supported the option.

A joint research paper by Royal London and consultants Lane Clark & Peacock highlighted the advantages of wider access to partial DB transfers for advisers, pension scheme members and trustees.

A partial transfer occurs when some of the value of the DB scheme is transferred to a defined contribution pot while leaving some DB rights behind.

Pension funds are not legally obliged to offer partial transfers, but trustees can choose to. For example, Ford introduced partial DB transfers this year which allowed members who make contributions to keep half of their pension and transfer the other half.

A survey by Royal London of 350 financial advisers with experience of the transfer market was included as part of the policy paper and found that in general the majority of advisers welcomed partial transfers as it offered their clients more options.

About 86 per cent of advisers said more schemes should offer partial transfers, with two in five in favour of this option stating greater flexibility in retirement planning as their main reason.

Several advisers also pointed out that a partial DB transfer could allow clients to have a combination of a secure income and greater flexibility over the remainder of their pension pot.

Many advisers thought the option would enable them to recommend a transfer in situations where they would otherwise recommend against it.