Changes coming to defined benefit pension transfers?

By Ryan Smith on September 11, 2018

A white paper from the DWP outlines the future of DB pension schemes and transfers following the pension freedoms.

As someone offering financial advice, you will know very well that pensions are a big concern for many people in the UK.

The past few years have seen a sea change in the ways that savers can take greater control of their pension pots. This is especially true when it comes to how defined benefit (DB) pension transfers can impact on their long-term plans.


In June 2017, the Financial Conduct Authority (FCA) proposed alterations to the rules on advising transfers from safeguarded benefit schemes. These were mainly for transfers from DB to defined contribution pension schemes.

The new rules included:

  • the provision of advice as a personal recommendation
  • taking account of a consumer’s individual circumstances
  • replacing the current transfer value analysis with the need to undertake a personalised analysis of consumer options
  • a comparison to show the value of the surrendered benefits

The FCA also published a consultation paper that proposed further changes, including requiring professionals offering pension transfer advice to hold the same qualifications as investment advisors.

White paper

There are now more changes in the pipeline that could affect you if you are working with financial advice clients. This time, they come from the Department for Work and Pensions (DWP) itself.

The department published a white paper on the future of DB pension schemes in March 2018, following the publication of a green paper in February 2017.


In its green paper, the DWP set out proposals aimed at protecting the future of DB schemes. This occurred because some industry commentators thought that these schemes were at risk due to the expected numbers of people who will be transferring funds away from them over the coming years.

Plans to make it easier to consolidate DB schemes featured in the proposals, along with the possibility of allowing employers to dilute benefits if a scheme ran into difficulties.

Increased powers

The DWP’s white paper continued to examine consolidation and look at increased powers for the Pensions Regulator.

Before its publication, David Gauke, Secretary of State for Work and Pensions, said: “This white paper will set out our proposed next steps on what reform is needed to support the sector, including the powers of the regulator. Our way forward is clear, and we will ensure that the system continues to balance the needs of consumers, the schemes themselves and business for the future.”

Informed decisions

Money advice and planning for retirement could be one of your biggest areas of operations. The FCA’s current rules on pension transfer advice aim to improve the quality of services that the public can expect. This has led many to ask themselves “Do I need a financial advisor to transfer pensions?”

At the time of the last set of changes introduced by the FCA, its Executive Director of Strategy and Competition, Christopher Woolard, said: “Where people are considering a transfer, it is vital that they get good advice to enable them to make an informed decision.”

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