Revealed: DB transfer ‘insistent client’ data since pension freedoms

Hannah Godfrey reports...

The number of insistent client defined benefit (DB) transfers have risen each year since pension freedoms, a freedom of information (FOI) request submitted by RP’s sister publication Professional Adviser has found.

The FOI, submitted to the Financial Conduct Authority (FCA), revealed there has been a steady increase in ‘insistent client’ transfers since pension freedoms came into effect in April 2015.

In the six months from April to September in 2015, 923 individuals were transferred out of their final salary schemes as insistent clients. Then, in the 12 months from October 2015 to 30 September 2016, the number rose to 2,004.

The following 12 months, between October 2016 and 30 September 2017, saw the biggest jump in the number of insistent clients transfers. It shot up by almost 50% to 3,026.

The next year the number of insistent clients rose again. Some 3,541 transferred on an insistent basis, according to the regulators data, between October 2017 and September 2018, representing an increase of 17% on the previous year.

According to previously released data from the Financial Conduct Authority, 2,426 firms provided DB pension transfer advice between April 2015 and September 2018. Of those, 620 firms (26%) facilitated transfers for insistent clients.

In total, 9,534 (13%) of the 72,904 scheme members who had been advised not to transfer out of their DB pensions, were transferred as ‘insistent clients’.

FCA pressure

CTC co-founder and managing director Nigel Chambers put the gradual increase in insistent clients down to pressure from FCA.

“There’s a lot of stuff from the FCA complaining that too many DB advice reports are coming out saying to transfer,” he said. “[The FCA is] complaining that 69% of transfer reports actually advise a transfer and the regulator is strongly of the view that it should be a minority of cases that you recommend transferring.

“So over time, you can imagine that more reports will say ‘no’ and that might inevitably lead to an increasing number of insistent clients.”

He continued: “The FCA are very clear that you have to lay out an awful lot of things before you can process the insistent client to show that you gave them full advice and they fully understood what they were doing. And there are going to be people who want to transfer anyway.”

Transfer stats

To add further context, previously published data from the FCA found the number of DB transfers from 2015 to 2018 increased at a greater rate than those transferring as insistent clients. However, the following figures from the regulator were estimates based on its work of 54 firms.

A previous FOI submitted to the regulator found that, between October 2015 and September 2016, there were 11,206 DB to defined contribution (DC) transfers. Then, from October 2016 to September 2017, that figure shot up to 36,830 – an increase of 229%.

The following year the data was only available from October 2017 to March 2018. However, that period saw 34,738 transfers – almost equalling the previous 12 months in half of the time.

More recently, however, a number of providers have reported a slowdown in DB inflows, suggesting transfer activity has passed its peak.

Recent figures from pension provider and platform company AJ Bell, for example, showed DB transfer inflows in the three months ending 30 June 2019 were at £200m – half of the £400m it reported during the equivalent quarter in 2018.