It’s been some weeks since I wrote about transfers. To recap, I have been predicting a seizure in the transfer market , resulting from high demand, low-advisory capacity and pipes blocked with regulatory effluent.
So it doesn’t come as a surprise to read
Hargreaves Lansdown has had to stop taking on new pension transfer business after hitting capacity following the introduction of pension freedoms.
The investment manager has had to turn away clients after being overwhelmed by a doubling in the number of people approaching it for transfer advice, the Financial Times reports.
Head of pensions research Tom McPhail says: “We stopped accepting clients for pension transfer advice a couple of weeks ago because we are running at capacity.
“We would rather not take on any work in order to continue to process the work we have in good time.”
Those making comments below this article in Money Marketing, reinforce the points I make at the top of this article. There really isn’t a satisfactory exit route for those who want out of guaranteed pensions.
There is a wider “macro-economic” angle to this. The guarantees that are so troublesome to advisers (and to providers receiving transfer values), are also troublesome to employers.
Until those guarantees come off an organisation’s balance sheet, they are part of the organisation’s debt and limit it’s capacity to invest, generate new jobs and create the wealth that drives GDP. I understand that considerable attention is being paid within Government to the impact of Defined Benefit Guarantees on the speed of the economic recovery,
These DB guarantees are the protection that many of us have against our own fecklessness, but they are also a barrier to improving general living standards for all. On the one hand, the Government needs to provide “lines of defence” to keep the dam from bursting, on the other it would like to let the flood-gates open.
Hargreaves Lansdowne’s testimony suggests that there is still considerable pressure among people with guaranteed pensions to exchange them for non-guaranteed savings (in a Hargreaves Lansdowne SIPP or elsewhere).
I have been arguing on this blog all year, that the pressure is from people who are prioritising their financial objectives over the short-term cost of transfer and the long-term value of the guarantees (which they clearly do not value as Government and actuaries value them),
It is time that people’s objectives were recognised as carrying weight in financial decision making. Were it possible to put a price on the emotional value of having a “Place in the Sun” or to be “debt-free” and to offset this against the financial loss of taking a transfer, I suspect many advisers would be recommending transfers to people who are currently branded insistent customers.
But insistent customers are toxic – they are the people whose business sits on an advisor’s books and is reviewed by future purchasers. Too many insistent customers and your business suffers.
The threat of the Professional Indemnity Insurer withdrawing cover, of the Ombudsman finding against you and the limitless scope and timescale of the liability is hindering the free-flow of people’s money through the dam.
I fear that with sluices blocked in this way, the dam may be stressed to breaking point.
Economists will point out that our recovery is retarded by pension debt.
Employers will complain that they cannot get on with rebuilding their organisations
Trustees will lose the will to fight scammers finding ways to liberate guaranteed pension accounts
Regulators will be powerless to prevent the carnage
Worst of all, people will get fed up with freedoms they cannot exercise and see the pension industry as once again frustrating them getting their hands on their own money.
We call on Government to bring together the various stakeholders trying to sort out the problems surrounding transfers and look both at the advisory issues and the long term “in retirement” solutions into which people can transfer.
We desperately need safe havens into which money – released from DB plans – can be invested. We need more and better in retirement product and we need a default option that neither suffers the inhibitions of guaranteed annuities nor the exuberant extravagance of SIPP drawdown.
We need a simple place for people to put their money, take an income and know they are alright.