Providers’ requirements for advice to be carried out on sub-£30,000 defined benefit transfers are affecting savers amid a shrinking market, experts have warned.
Concerns were raised after research by FTAdviser showed more receiving schemes now require advice on small DB transfers than three years ago, despite this not being a regulatory requirement.
Industry experts warned it was already “incredibly difficult” for savers to get advice on large DB transfers as the advice market shrinks each year, so requiring advice on smaller pots was “highly impractical” for savers.
Phil Handley, pension transfer specialist at Smith Robinson & Co, said: “Where there were more advisers previously, there may have been enough capacity for some advisers to take on the sub £30,000 clients.
“Now, with so many advisers either being priced out by PI companies, scared out of the industry by the excessive regulation or being refused indemnity insurance, those left are more likely to cherry pick the larger cases.”
Andrew Tully, technical director at Canada Life, thought although people are allowed to proceed without advice on sub-£30,000 transfers, it was still a good idea to get advice.
Mr Tully said: “An adviser can talk through the risks of transferring and compare and contrast that to the risks of remaining in the scheme”
But others are concerned about the struggle to find advisers operating in this market. In addition, in cases where advisers are available, transfer advice can be so costly that savers decide against it.
Steve Webb, partner at LCP said: “It is hard enough to obtain DB transfer advice for larger pensions, but where receiving schemes require advice for small transfers that will in effect be a block in most cases. Even where such advice can be obtained, it is unlikely to be cost-effective.”
The introduction of abridged advice may offer up new options for those with smaller transfers as it is seen as a cheaper option.
Abridged advice sits in between triage and full pension transfer advice but can only result in a recommendation to not transfer out.