The concerns relate to the number of times where transfer value quotes provided by DB pension schemes have lapsed before the member is ready to go ahead with a transfer. A new quote is then required, often costing several hundred pounds, and there is no guarantee that the new quote will be as favourable as the original quote.
Floyd Fombo, Chartered Financial Planner at Rathmore, said that the current three month validity of a Cash Equivalent Transfer Value (CETV) often does not allow time for all necessary information to be collected from the DB pension scheme and then the full advice process to be completed. He highlighted a combination of factors including delays in scheme members contacting an adviser having received a quote, pension schemes regularly providing insufficient information to enable a transfer value analysis to be undertaken, and the understandable need for advisory firms to make sure that any advice provided is rigorously checked.
This issue has now been taken up by Royal London policy director Steve Webb with the Pensions Regulator. He has asked the regulator to look at whether the process could be streamlined, for example by requiring schemes to provide more information when the transfer value quotation is issued. This would reduce the delays faced by advisers having to chase pension schemes for additional information.
Floyd Fombo said: “In the 11 plus years that I have been involved with reviewing DB schemes, I have not once known a DB Administrator to provide all the required information at first request, it is also rare to have this by the second, sometimes even third request.
If any of the requested information is missing, we cannot accurately complete a TVAS, and as such this will result in incorrect Critical Yields being generated, which would mean we would be providing advice based on flawed numbers, putting both the client and the advisory firm at risk”.
Steve Webb said: “It is deeply frustrating for scheme members and advisors when the process of providing advice on a transfer drags on, and particularly if a new quote has to be prepared. Whilst DB pension schemes are under pressure because of the volume of transfer requests, it would probably save them time in the long-run if they provided comprehensive information alongside the transfer value quotation, rather than have to keep replying to follow-up queries. I hope that the Pensions Regulator will look closely at how to speed this process up”.
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