AJ Bell research finds adviser dissatisfaction with Transfer Value Analysis assumptions

As the UK regulator is continuing to examine the way the financial services industry is handling pension transfers – with a particular focus on defined benefit pensions – research unveiled today by AJ Bell reveals that “the vast majority of [UK] financial advisers say they disagree with the current Transfer Value Analysis assumptions used to assess defined benefit to defined contribution transfers”.

According to AJ Bell, a UK pension provider, 79% of the advisers it surveyed “don’t believe that annuities remain the appropriate basis upon which to assess critical yield calculations” in the wake of the “pension freedoms” that were brought in by the government in April 2015.

Some 80% of those surveyed said they are still advising on defined benefit [DB] transfers, which AJ Bell noted suggest that “urgent clarification is needed from the Financial Conduct Authority on whether it plans to update the current guidance available to advisers”.

The consultation comes as the FCA’s recent focus on pension transfers has seen a number of firms having to suspend the giving of transfer advice after visits from the FCA, and market experts of warning of a potential mis-selling scandal as a result of the growth in DB transfer requests. The FCA is expected to release a consultation on advising on pension transfers tomorrow, AJ Bell noted.

In announcing the results of its research, AJ Bell urged the FCA to “set a clear timetable for the reform of DB transfers” and recommended that its consultation cover three key areas: “the current regulatory presumption that a DB transfer is unsuitable”; current Transfer Value Analysis (TVAS) assumptions ; and how the advice process and related charges are handled.

AJ Bell platform expert Mike Morrison, pictured, said in a statement accompanying the research results that it was ““slightly mystifying that the FCA has not yet confirmed the full scope and timetable for its consultation on DB transfers”, but said clarity was expected this week, and expressed the hope that there would be clarity before week’s end.

“The volume of activity around DB transfers is higher than it has been for years and the regulator is clearly looking closely at some firms, but then it is leaving the majority of the market to operate in a bit of an information vacuum,” he warned.

122 advisers surveyed

AJ Bell carried out its research earlier this month, online. A total of 122 advisers, all of them located in the UK, participated.

The company was founded in 1995, and doesn’t advise on pension transfers itself, but as a provider, receives them into its SIPP if recommended by advisers.

One of the UK’s largest providers of online pension, investment and stockbroking services, AJ Bell has assets under administration of £36.3bn, and more than 152,000 clients. It’s owned by its management team and three institutional investors: Invesco Perpetual, Woodford Investment Management and Seneca Investment Managers.

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