Pensions transfers- potential business opportunity?


In think it was Winston Churchill who said: A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.

I was reminded of that quote when I was reading an article written by a well-known pensions activist, about an Actuary (yes, an Actuary) who was giving up his defined benefit pension in return for a CETV (cash-equivalent-transfer-value) of x40 (yes, 40 times) the value of the pension.

The scheme, like a lot of similar schemes, was invested heavily in gilts as part of a managing the liabilities within the scheme (as advised by the Actuaries, but maybe not the same one transferring?) and the discount rate quoted was gilts+1% or a discount rate of 2.4%.

And that in one sentence is the reason why you have seen articles written from the FT to the BBC about the massive size of current DB CETV transfer values: discount rates have never been lower on capitalised pensions which have never been higher.

Never have there been more actuaries in need of a competent IFA (pension transfer specialist).

And they do need advice; regulated advice from a business which has the permission from the FCA to conduct DB transfers given by a competent pension transfer specialist (and that includes the actuary, who wouldn’t be holding the regulated authority to advise himself on the transfer).

To become a competent pension transfer specialist doesn’t just mean passing an exam: it doesn’t mean you pass the CII AF3 or AwPETR and become a pension transfer specialist. It means more than an exam.

It means you have to prove competence (as well as technical ability through the exam qualification).

It means in the words of the FCA ‘’ ….the…advisers have been assessed and signed off competent to such extent the FCA would be able to grant permission without additional, structured and defined oversight arrangements in place….would be an implemented procedure whereby a prescribed number of files would be checked pre-advice/sale, before signing advisers off as competent, once the prescribed number of cases are closed without issue….’’

That means you have to prove competence through a structured program approved through your application.

Further, in the words of the FCA: ‘’ introduction of a locum arrangement with a recognised and experienced external pension transfers firm/specialist who already hold(s) the permission’’.

How do you go about such a plan if you are on your own, you are directly authorised and/or you are not connected to either a supporting compliance network prepared to provide oversight or training or mentoring to the effect that you would be able to satisfy these requirements: ‘’ ….please let us know who will be carrying out the file checks, how many files will be checked and what the proposed response (to any issues being identified during the check) would be.?

Where can you go to develop your experience and competence in these matters to enable you to advise an Actuary on his transfer?

You should think about a structured training and mentoring program, with observations, technical assessments and ongoing file checks toward competence to support your application.

One where your activity is recorded, audited and certified at each step. One where you are mentored to full competence.

DB transfers can be difficult.

They are technically challenging and will test you at every level of your IQ and EQ; they test your years of accumulated advisory experience and technical competence. They are high-risk.

But, as the Actuary knows, there is opportunity in every difficulty.


About Author

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Dubbed by friends and colleagues “The Pensions Professor”, John Reynolds is widely acknowledged as one of the country’s leading experts in the financial services education sector. He has spent 20 years teaching, consulting, mentoring and writing on the subjects of pensions and investments. John’s unique ability to take his years of experience and technical knowledge and present it in an easy to understand format, has resulted in his talents being very much in demand. His portfolio of corporate clients include CII, Lloyds, Scottish Widows, Santander and Wesleyan; as well as numerous IFA clients whom he provides technical consultancy, mentoring and training on client case studies and staff training.. He has put his extensive expertise (and heart and soul!) into developing the expertpensions (EPL) proposition. EPL is a structured and interactive technical exam training programme for IFAs. It's designed to give financial advisors the required technical knowledge, study strategy and exam technique to confidently sit and pass the AF1, AF3, AF4 and AF5 exams. Its online, it's fully supported, structured and designed to help advisers reach Chartered Financial Planner status quicker. It's ready to help your advisers reach chartered status

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