Pension freedoms have opened defined benefit members’ eyes to the mouth-watering transfer values currently on offer if they give up their guaranteed benefits and move to a defined contribution scheme.

At the same time, the FCA’s requirement that people transferring out of a DB scheme with a value of £30,000 or more must take regulated financial advice has increased demand for advisers’ services.

Some commentators point to an apparent contradiction between DB members having a statutory right to transfer to a DC scheme and the FCA’s starting assumption that transfers are not in the members’ best interests.

Kate Payne called it an “odd mismatch”. She said: “There needs to be a better link-up between the Treasury, the Department for Work & Pensions and the FCA. Pension freedoms were introduced by the Treasury, the DWP effectively put in place the requirement to take advice of transfers of more than £30,000 and the FCA is saying ‘We know you can advise on transfers but the starting point is that it’s not in the client’s best interests’. It’s a strange starting position to say it’s not suitable. If you’re a single person with no dependents, why not take the money?”

While Kate agreed that it is right the FCA’s focus is on ensuring any potential transfer is suitable for the client, she believes this needs to be based on the full facts rather than general assumptions that pre-date pensions freedoms.

If the barriers in the way of DB members exercising their statutory right to transfer and getting suitable advice continues, she worries this could increase the number of insistent clients. She is also concerned that, if people cannot access advice from a reputable adviser, more could become susceptible to the scammers and undesirable firms the regulator is trying to clamp down on.

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