Thousands missing out on richer retirement due to lack of advice

Hundreds of thousands of savers face not being able to access their pension pots because of a dearth in affordable, quality advice. Six years ago, pension freedoms were introduced to great fanfare, offering savers the opportunity to do with their retirement savings as they choose. 

But today, pension experts warn that far from finding freedom, savers with defined benefit pensions could be left trapped in a plan that does not suit them, leaving them without the financial flexibility they crave in older age. 

Defined benefit pension plans were once offered by most employers and provide scheme members a guaranteed income at retirement – calculated on a mix of years worked and final salary. 

Cash grab: Savers with defined benefit pensions are now required to get financial advice before they are able to enjoy pension freedoms

Cash grab: Savers with defined benefit pensions are now required to get financial advice before they are able to enjoy pension freedoms

By way of contrast, a pension from a defined contribution plan, now the mainstay works pension for many, is dependent upon the amount contributed and the plan’s investment success. 

Savers with defined benefit pensions are now required to get financial advice before they are able to enjoy pension freedoms. However, a well-intended crackdown on advisers in the wake of the British Steel scandal, in which many employees were advised to transfer their pensions against their best interests, means that even the number of good quality advisers is dwindling. 

Steve Lowe, a director at retirement specialist Just Group, warns that access to high street advisers who offer quality pension transfer advice are ‘on a glide path to oblivion’. 

He adds: ‘This is a threat to pension freedoms – it cannot be maintained as a policy unless something changes. It’s getting increasingly challenging for people who legitimately want to consider converting their defined benefit pension into a more flexible pension.’


Defined benefit pensions are among the most generous of pension scheme arrangements and most savers would be wise to hold on to them. 

But there are some circumstances in which shifting from a defined benefit pension that provides an income into a scheme that offers access to your full nest egg can make good financial sense. 

Savers in poor health, those looking for greater financial flexibility, or those wishing to pass on their pension to their loved ones, are among those for whom a transfer may make sense, although not always. 

In some cases, defined benefit pension schemes offer members life changing sums – called transfer values – worth hundreds of thousands of pounds to get them off their books. 

Savers are forbidden from accessing a defined benefit pension worth £30,000 or above without first getting financial advice. 

This is to stop anyone from giving up a valuable pension without fully understanding what it is worth and before checking that it is the right move for them. However, the number of advisers who offer this type of advice is dwindling, leaving savers with fewer options. The number of specialists operating in this key financial area has halved to around 1,500 since late 2018. 

Worryingly, one in three of those remaining are unsure that they will be providing advice in a year’s time, according to recent research from financial consultants Lane Clark & Peacock (LCP) and insurer Aviva.


Financial advisers are leaving the pension transfer market in droves. Aviva and LCP questioned more than 200 advisers who offer – or recently stopped offering – pension transfer advice. 

The most common problem cited was the soaring cost of professional indemnity insurance, which covers advisers if any client later claims they were given poor advice and seeks compensation. The cost of this insurance has gone through the roof in recent years. 

Alistair McQueen, head of savings and retirement at Aviva, warns that small adviser firms in particular have been hit by the rising costs. 

He says: ‘There are some firms that have been advising in this market for years and have never had a complaint or a sanction. Yet, because insurance costs have gone up by several multiples, they have been forced to leave. It’s not a good outcome, because consumers no longer have access to that good adviser.’ 

Other reasons why advisers have been driven out include the perceived hostility of the regulator towards transfers and the ban on contingent charging, which means that members now have to pay for advice whether or not they go ahead with a transfer. This has acted as a deterrent. 


Savers face rising costs and fewer options. Those who chose to transfer out in the past year faced record fees after transferring, new figures from pension administrator XPS found. 

Upfront costs for transferring can be anything up to £20,000 for the largest pension pots. Savers with smaller pots in particular are likely to find the cost of transferring unjustifiable or unviable, leaving transfers open only to the wealthiest. McQueen worries that faced with few options, some savers may be pushed into the clutches of less professional advisers.

‘Savers may be more exposed to less scrupulous advisers who may not be operating in the best interests of their clients,’ he says. ‘Any market where you have an imbalance between demand and supply is not healthy.’ Steve Webb, who instituted the pension freedom reforms as Pensions Minister and who is now a partner at LCP, adds that some savers may decide not to bother transferring since they can’t get affordable advice – while others may end up paying more. 

‘Obviously a big advice fee represents a large slug out of your pension pot, so that’s not a good outcome,’ he says. 

‘Savers may also find it hard to find an adviser who offers access to all the pension products on the market. That is not necessarily bad, but it’s often better to use someone who can scan the whole market.’ 

Michael Shorthouse, 57, a former banker from London, has been trying for a year and a half to transfer one of his pensions. 

‘It’s been hard to find an adviser I trust, and it’s a long-winded process,’ he says. ‘I am being charged around £11,000 for advice, and that is the cheapest I’ve been quoted – others were considerably more.’ 

McQueen warns that the imbalance between supply and demand could grow further still as a number of over-55s made redundant during the pandemic choose to retire early.


Some savers will find their employer offers help. Many large firms with a defined benefit pension scheme provide members with access to a reputable transfer advice firm. 

The cost of advice is generally around half of what it costs on the general market. 

This is because it is often subsidised by employers, and advisers will be fully acquainted with the ins and outs of the pension scheme about which it is offering advice. ‘The adviser already knows every detail down to the inside leg measurement of the pension scheme, so they can offer cheaper, more efficient advice,’ says Webb. 

‘But for savers who aren’t offered help from their employer, with every passing year they will have fewer options. There are literally fewer doors you could knock on and fewer firms offering it.’ 


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