DB adviser numbers plummet on back of pension transfer mis-selling scandal

Aegon and NextWealth’s annual “Managing Lifetime Wealth: retirement planning in the UK” report has revealed that only 23% of financial advisers now offer defined benefit (DB) pensions advice, representing a fall of 59% since 2018.

In 2018, 56% of financial advisers were offering DB advice, and the consensus among the sector at the time was that client demand would continue to grow.

However, in addition to the plummeting number of advisers offering DB pension advice, only 14% of those now doing so expect they’ll remain in the market at their current level.

Why have adviser numbers dropped so dramatically?

Aegon’s pensions director, Steven Cameron, said the most significant change in the last five years had been the “major reduction” in DB pension transfer advice availability. Cameron noted that this was down to several factors, including the increased business risk of providing such advice and the tighter regulatory controls introduced by the Financial Conduct Authority (FCA) in recent years.

Ultimately, the background to all this is the final salary pension transfer mis-selling scandal, which has left many pension scheme members out of pocket.

Cameron also explained the current financial climate is likely playing a role. He said: “With interest rates still rising, schemes are offering lower transfer values than a year ago, which is likely to mean a lower supply will be matched by lower demand.

“But it’s hard to predict what the position will be five years from now.”

The report was compiled from research completed in November and December 2022, which saw the firms survey 221 financial advisers and 209 consumers who had received retirement advice.

Changes in how advisers set withdrawal rates

In addition to the significant change in the number of advisers offering DB advice, how advisers calculate withdrawal rates for clients in drawdown has also evolved.

In 2018, 66% of advisers said they used a fixed rate or range to determine a safe withdrawal rate. Only 29% now follow this method, with 52% using cash flow or scenario modelling.

Cameron added: “Coming a close second, is the approach to determining safe drawdown withdrawal rates.

“The top objective in 2023 for clients is to use savings to provide a sustainable lifetime income while preserving all or part of the capital.

“The increased use of cash flow or scenario modelling to identify a safe withdrawal rate means that advisers have been able to add further value to clients working towards this objective – advisers can better assess whether against an uncertain future investment world, clients should be able to meet their income requirements without running out of money with this approach.”

Some elements of the sector are not changing as predicted

While many of the changes seen in the industry were predicted and expected by advisers, some expected changes did not come to pass.

One example of this was the adoption of a centralised retirement proposition (CRP). In 2018, 46% of advisers said they had a CRP, and another 13% said they would do so within the next 12 months, suggesting the number would be 59% at the end of 2019. But, today, the figure sits at just 52%.

Cameron said: “One of the main reasons for not introducing a CRP could be that many advisers understandably prefer to fully personalise their advice to individual client needs.

“However, having a common framework for retirement advice, with some inbuilt flexibility, may be attractive particularly to larger firms. It’s possible that we’ll start to see a growth in some form of CRPs this year, as firms reassess their service propositions in light of the FCA’s consumer duty.”

Cameron also added that he believed the market would continue to develop to incorporate social care funding into retirement advice and that the introduction of consumer duty would further demonstrate the value of retirement advice.


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