Royal London and LCP call for wider access to partial DB transfers

Holly Roach reports...

There needs to be wider access to partial transfers out of defined benefit (DB) schemes, according to a joint paper published by Royal London and Lane Clark & Peacock (LCP).

The research paper ­- published on Tuesday (1 October) – has renewed calls for the halfway house approach, and presents potential advantages to trustees, employers, advisers and scheme members of these types of transfers.

Claiming it would be a better option for those whose lifetime pension rights lie in a single DB scheme, the paper includes two pieces of research assessing industry attitudes to partial transfers.

A survey by Royal London – which questioned 350 financial advisers – found that around five in six advisers agreed they want to see more schemes offering partial transfers, with two thirds arguing this should be a legal right.

A number of advisers said that offering a partial transfer provides the “best of both worlds”.

LCP’s separate survey of more than 100 occupational pension schemes found the proportion of schemes offering a partial transfer option had risen since 2017 from 15% to 22%, which included large schemes, as well as those with assets of under £500m.

However, the firm found where this option was available, initial take-up was often low due to the need for it to be effectively and clearly communicated.

Royal London director of policy Steve Webb (pictured), who co-authored the report, said: “Pension freedoms give people new options to shape their retirement wealth in the way that is right for them. But for too many people this is an all-or-nothing option, involving giving up all of their guaranteed pension income in retirement.

“We would like to see far more schemes offering partial transfers, where members can retain a secure pension but also enjoy greater flexibility. This genuinely could be the best of both worlds.”

LCP partner Jonathan Camfield, who was also a co-author, said: “Our research shows that growing numbers of schemes are offering partial transfers and this is to be welcomed. But many more could make this option available to their members.

“Although there are technical and practical issues which schemes would need to address, large and small schemes have already demonstrated that these can be overcome. Greater access to partial transfers would benefit members and also schemes, by reducing risks in the DB transfer process.”