A nationwide survey by international retirement specialist Momentum Pensions of 107 advisers specialising in pensions planning, found that nearly six out of 10 (57%) believed that concerns about the future solvency of DB schemes will increase this year, encouraging an acceleration of transfers into Sipps.
Increasing outflows from DB pension schemes is a trend that appears to be already supported by data.
Last month, professional service group Mercer revealed the amount of money being withdrawn through transfers from DB pension schemes in the UK had reached a record £50bn ($65.4bn, €57bn) by 210,000 members since the pension freedoms came into force in April 2015.
Sipps seem to be particularly well placed to benefit from the tendency. Momentum’s research also confirmed the growing demand for transfer advice, with over half of advisers (55%) questioned in the survey reporting to have seen an increase of the request for DB transfers into these products this year.
This is despite evidence that the Financial Ombudsman Service received 15% more complaints about pensions in 2016/2017, with Sipps one of the most complained about products.
DB scheme viability
The Momentum study also found that nearly two-thirds (63%) of advisers are concerned about the long-term sustainability of some DB schemes clients are invested in.
“Recent industry figures valued DB pension liabilities held by small and medium-sized enterprises jumped 7.5% to £4.3bn in 2016” observed John McCreadie, head of UK sales at Momentum Pensions.
Headwinds for future final salary scheme solvency such as low-interest rates, increasing life expectancies and rising costs mean that advisers need support, according to McCreadie.
“The growth in transfer advice is placing unprecedented demands on advisers, who need unwavering support from Sipp providers to ensure the Sipp meets their clients’ future retirement needs.
“This means robust due diligence procedures, clarity on charges as well as the widest choice of investment options and deep technical support,” he said.
There are, however, pockets of defined benefit scheme members that are persistently wary of transfers.
According to new research released by Prudential, more than two out of five advisers (44%) have seen a rise in the number of “insistent clients” wanting to push ahead with DB pension transfers in the last year, despite having been recommended against it.
