Does your DB transfer process protect, inform and facilitate?

Published by Luke Thackray on

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  • Luke Thackray

    Luke Thackray


  • Estimated reading time: 5 minutes

    According to FCA research, almost 235,000 defined benefit (DB) pension scheme members have received advice between April 2015 and September 2018, with just over 170,000 individuals being recommended to transfer and more than 9,000 of them transferring as insistent clients. There is a clear trend of more members being interested in transferring as we compare this against figures from the FCA in 2016, which revealed that fewer than 8,000 had transferred between Q3 2015 and Q1 2016.
    "There's increasing regulation and guidance in the pensions industry which focus on schemes delivering better value for its members."

    There is increasing regulation and guidance in the wider pensions industry which focuses more on schemes delivering better value for its members.

    As such, we are seeing trustees and companies alike increasingly looking at how they need to do more to help members access their well-established freedoms and flexibilities.

    There is already an obligation to communicate to deferred members about their options available, which includes their transfer options.

    However, given the increasing demand among members, there is a risk that a little bit of information may be just as dangerous as no information, as members resort to the open market to seek the answers and advice they crave.

    What does a good DB scheme transfer framework look like?

    Whatever pieces your framework contains, it needs to focus on doing three main things:

    1. It protects

    Protecting the member is at the forefront given the importance and impact this decision could have on them. We need to quickly give members the overview of the offer, highlighting the key considerations they need to make so they can assess whether to spend more time investigating further.

    That said it also needs to protect the trustee and the employer, which means making sure members have access to good quality guidance, where member activity can be audited in case of any dispute. Thorough review and due-diligence in each step of the process is also key.

    2. It informs

    Empower members by giving them access to the tools they need to make better decisions.

    Data flows are critical in making sure each party involved at each step knows as much as possible about the member. Trustees need to be kept informed of the volumes of interest and why members are choosing to transfer so they can shape their scheme better.

    3. It facilitates

    Ensure the member’s journey throughout the process is as integrated and connected as possible to keep administration efficient and to keep members engaged. No action is a decision in itself, and that shouldn’t come down to the process being too hard.


    Pieces of the jigsaw

    We believe there are three key pieces needed in order to deliver an engaging, efficient and compliant DB transfer process:

    1. Protect

    Ensure members understand the decisions and options available with clear, impartial and interactive guidance. Protect them from making rash decisions by making it easy to reach an impression as soon as possible.

    2. Inform

    Our tell, teach, involve framework still holds true to break down the detail:

    • Quickly tell members about those key messages and home in on the takeaways;
    • Break down and teach members about those further details and key considerations on the options available;
    • Involve the member further to reinforce those key messages with interactive planning tools which empower them to make their own assessment of the options, the benefits and risks, and ultimately start to form a plan for their retirement, being able to compare side-by-side the decision ahead.

    Look at extending this wider to ensure members are also able to view any decision in the context of their wider holistic retirement world, encapsulating both defined contribution (DC) and DB schemes together.

    3. Facilitate

    Use your engagement portal as a triage tool to facilitate access to good quality advice. This also makes sure that any advice sessions are used by those who may be genuinely interested, saving the member or scheme money. Members also get better value out of the advice session itself as they come prepared, ready for the adviser to get into the detail straight away.

    1. Protect 

    Protect members from the open market’s risk of poor quality advice, high charges and potential scams by partnering with the right IFA following a thorough due-diligence and market review. Separating guidance and advice also protects against any guidance straying into the advice territory.

    2. Inform

    Good advisers will look deeper at the member’s wider circumstances and attitudes, challenging them on why they feel they need more flexibility. 

    3. Facilitate

    Giving access to good quality advice can remove a time-consuming and stressful barrier for members.

    IFAs must carry out an Appropriate Pension Transfer Analysis (APTA), for every member they advise, but preparing an APTA can be complex and time-consuming, particularly where IFAs outsource such analysis.

    1. Protect

    Deliver consistent, robust and compliant calculations developed by those who specialise in actuarial analysis, with their calculations being independently reviewed and used across the industry.

    2. Inform

    Online APTA informs the IFA, making sure they know as much as possible about that member – not just for their advice, but for the first time they get in touch.

    3. Facilitate

    Being online ensures the end-to-end process remains robust and streamlined, with IFAs being given immediate access to the APTA calculations they need for that individual. This avoids members waiting weeks at a time while IFAs go to market to outsource the analysis.

    How we can help

    We can build and deliver the right transfer framework which gives you and your members the level of support they need.

    We readily support IFA selection, removing a large barrier for members and greatly improving their experience.

    We can also provide Online APTA, our digital transfer analysis tool used by IFAs as part of their advice process.

    For more information, contact Luke Thackray.

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