Around 69 per cent of people who have transferred a DB pension to a DC pension in the previous four years said they were satisfied with their choice.
Actuarial consultancy OAC’s analysis of the Financial Conduct Authority’s (FCA) Financial Lives Survey data reveals potential consumer risks in the DB transfer market.
The data indicates that an additional 10 per cent of individuals with DB pensions mentioned that they had considered a transfer. Among them, 25 per cent stated they are likely to proceed with the transfer but only 36 per cent reported discussing the matter with a financial adviser.
OAC head of redress solutions Brian Nimmo says: “Defined Benefit pensions offer huge security in retirement in providing certainty of income. There is a reason most DB schemes are now closed to new members – paying out such generous pension promises is hugely costly. Ultimately most people are likely to be better served by remaining within their DB pension scheme.
“In the work we do, we see first-hand the extent of the pension losses that many individuals have suffered through leaving the relative safety of their DB pension.
“Regulations around financial advice have been a focus for the FCA in recent years and it has tightened up its rules significantly which is a positive in establishing greater trust. Yet it is worrying that little over two-thirds of people who have completed a transfer in the last four years have said that they were satisfied with their decisions and that huge numbers are still considering it.
“We’d urge everybody considering a DB transfer to discuss the matter with a fully qualified, regulated financial adviser to get a true sense of its impact on their standard of living throughout retirement.”
