Pension providers issue stark DB transfer warning to members
UK regulators and providers this morning issued a stark warning to pension scheme members looking to transfer from a defined benefit (DB) to a defined contribution (DC) pension during the covid-19 crisis, saying the move is unlikely to be in their long-term interests.
Under guidance published by The Pensions Regulator (TPR) this morning, pension scheme trustees have been asked to send DB members looking to move retirement funds a letter warning them of the risks of doing so during the pandemic and urging them to consider the decision carefully.
The TPR is concerned that, with covid-19 causing market volatility and uncertainty for businesses and personal finances, pension members could be at risk of making knee-jerk decisions that could hit their pensions.
TPR chief executive Charles Counsell said: "We are determined to do all we can to protect savers' retirements from the unprecedented impact of covid-19. A decision to transfer a pension pot that's taken a lifetime to build is a very serious one and we'd urge members to be very, very careful making any transfer decisions at this time.
"That's why for the foreseeable future, anyone who is looking to transfer their benefits out of their DB scheme should be sent a new warning letter to make them stop and think as well as point them towards free, impartial guidance available from the Pensions Advisory Service."
Outlook is 'extremely uncertain'
Ian Browne, a pensions expert at Quilter, said pension savers should "consider the options available to them very carefully. The sudden change in the economic landscape has created an environment which could tempt many DB pension holders to transfer to a DC pension.
He warned that "The fluctuations in bond yields and investment markets has increased potential transfer values, and many will be tempted by the opportunity to invest their retirement pot in a depressed market."
"But the economic outlook is still extremely uncertain, and the relatively high transfer values should not be an automatic reason for a member transferring out. The guaranteed income from a defined benefit scheme should not be downplayed and a transfer will only be in a members best interest in the minority of cases.
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