UK adviser Mattioli Woods has confirmed it will not return to providing advice to clients looking to switch their pensions out of defined benefit schemes.
Chief executive Ian Mattioli said transfer valuations were declining, costs were up, and the regulators are applying the brakes to the market.
“Following consideration of the increasing costs of professional indemnity insurance, additional regulatory controls and the resources we would have to dedicate to this small part of our business, we have stopped giving pension transfer advice to individuals with safeguarded or defined benefits,” he said.
“The impact of this decision on the group’s financial performance is not expected to be material, with pension transfer advice to individuals with safeguarded benefits contributing approximately 1.6% of direct revenues for the year, and less to profit given the significant compliance costs associated with this activity.”
Defined benefit exit
According to Mattioli Woods, it has withdrawn from giving transfer advice on DB pensions because of:
- An ongoing Financial Conduct Authority (FCA) review of the market;
- Increasing costs of regulation and resources required; and,
- An “evolving” professional indemnity insurance market.
Ian Mattioli will also likely find support for his views at The Pensions Regulator (TPR), which found that the majority of pension transfers are not in clients’ best interests.
According to TPR, some pay outs from DB schemes have been overgenerous and risk jeopardising remaining members’ savings.
It has written to scheme trustees to remind them of their responsibilities and to members; advising them against risky cash outs.
However, despite the warnings, the DB transfer market has surged with £20.8bn ($26.6bn, €23bn) transferred out of protected schemes last year; outstripping government predictions.
