Surge in pension transfers recorded

Surge in pension transfers recorded”

The survey also found that the most common transfer values ranged from £250,000 to £500,000, larger than the average value of a United Kingdom home (the average United Kingdom house price was £220,000 in April 2017, according to Land Registry data). By comparison, the average United Kingdom house price was £216,000 in March 2017, it said.

Sankar Mahalingham, head of DB growth at Xafinity, comments: 'The research from Royal London reflects what Xafinity has found from its own experience - both that there has been a huge surge in actual transfer values out in the a year ago and that transfer values remain at high levels.

HMRC has scrutnised QROPS pensions to make sure they are compliant with United Kingdom rules and are not pension liberation schemes. The recent pension freedoms gave over-55s with a DC pension more choice over how they take their pension pot.

Many employers are offering cash of up to 20 or 30 times expected pensions to encourage savers to leave the schemes, which are often facing a shortfall of millions of pounds to pay benefits. A quarter of advisers however reported transfer values worth 30 to 40 times the annual income they were giving up.

More than 800 financial advisers took part in the survey.

However, while transfer values might be looking very tempting, Royal London's director of policy, Steve Webb, says scheme members must not rush into a decision: "It is clear that large and growing numbers of people are choosing to exchange the promise of a regular pension in retirement for a large cash lump sum. For some people, the value of their pension pot will be greater than the value of their house".

Several of the advice firms involved have offshore advisers dealing in pension transfers for expats to QROPS, QNUPS and other retirement products.

The principal concerns were concerns about losing the certain income from the final salary scheme, the risk associated with the transfer was not appropriate for the client and the proposed transfer value represented poor value.

But the Financial Conduct Authority is investigating these transfers and has already stopped more than 50 advice firms from making transfers either by agreement or by issuing an order - and many advisers fear more firms will face a ban.

Around 60% say they "sometimes or often" have to get a new transfer value quote because the three-month window of validity lapses before the advice process is completed, and nearly 90% want standardised information to be supplied by schemes.

The vast majority said they "strongly supported" an initiative for information to be supplied by schemes alongside transfer value quotes.

Webb said: "Sometimes the process takes far too long, through no fault of the adviser".

"We expect a firm advising on a pension transfer from a defined benefit scheme or other scheme with safeguarded benefits to consider the assets in which the client's funds will be invested as well as the specific receiving scheme".

According to a survey of advisers carried out by Royal London, the volume of transfers out of final salary pension schemes - which pay a guaranteed income for life - has grown by over 50% in the past year.

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