Analysis by leading financial services consultancy Broadstone of the latest Financial Lives Survey from the Financial Conduct Authority (FCA) finds a concerning lack of satisfaction among DB transferors.
The figures showed that only 68% of those who have transferred money from a Defined Benefit (DB) to a Defined Contribution (DC) pension in the last four years were happy with their choice, dropping to 64% of those with household income of below £50,000.
Despite the low levels of satisfaction for such a significant financial decision, the FCA data still shows that more than one in 10 (12%) people with a DB pension in accumulation are considering transferring into a DC pension, with a further 6% saying they did not know.
Of this group, over a quarter (26%) think they will proceed with a transfer but less than a third (32%) have consulted a financial adviser about the implications of a transfer.
Brian Nimmo, Head of Redress at Broadstone, said: “Defined Benefit pensions offer security in retirement by providing guaranteed income no matter how markets behave or investments perform.
“It is for this reason that, ultimately, the majority of pensioners with DB pension guarantees will be better served staying within their scheme. The FCA’s data suggests this remains the case with fewer than seven in 10 transferors satisfied with the outcome of their transfer.
“However, some members could see benefits from accessing cash faster from their DB pension, especially those at the smaller end of the spectrum, for a specific reason such as to pay off a mortgage or provide a gift.
“Regulations around transfer advice have tightened significantly in recent years which should give those considering a transfer peace of mind that they will receive trustworthy and expert advice on whether this is a good idea.”
The latest Broadstone Defined Benefit Redress Tracker found that compensation levels have dropped significantly from a few years ago but compensation is still due in many cases with each assessed on an individual basis.
