Only a fifth of interested 'defined benefit' pensioners actually transferred cash out of their scheme, research shows.
The number of retirement savers transferring their final salary pension schemes has hit a four-year low.
Only 21% of members who requested quotes in Q3 2020 went on to transfer funds, according to pension consultants Lane, Clark, and Peacock (LCP) based on 81 defined benefit (DB) schemes.
This is the lowest take-up rate seen since 2016 and below the average rate of 27%.
Retirees are taking more money out though, with the average transfer value reaching £480,000, the second-highest amount since the first quarter of 2017.
A quarter of the payouts were to members aged 60 and over.
LCP said there has been a gradual increase in quotation requests amid the pandemic between late May and June this year. However, these are now running at 80% of pre-lockdown levels.
The Financial Conduct Authority (FCA), a financial regulator, banned contingent charging – where advisers were only paid if a client transferred their money – in October. Industry groups say the LCP figures suggest this clampdown is working.
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Craig Rimmer, policy lead for master trusts at the Pension and Lifetime Savings Association (PLSA), says: “For most people it is a bad idea to transfer out of their defined benefits scheme so the drop in numbers transferring out is welcomed.
“We do remain vigilant however to the risk that mis-selling could still be taking place and support the FCA in their efforts to improve pensions transfer advice.”
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Andrew Neligan, wealth manager for Neligan Financial, says the data is also not surprising given many advisers have left the market due to pricey professional indemnity insurance and regulatory and compliance issues.
“In the main I agree with the FCA’s motivations and objectives but unfortunately it has led to situations where consumers wanting to access pensions, particularly where they have small pots just above the £30,000 threshold requiring advice, who are left stranded.”
It comes as scheme administrator XPS Pensions warned this week that increasing numbers of transfer requests were showing signs of being scams.
The number of transfers showing signs, or a ‘red flag’, of a potential scam reached a new high of 62% in September, up from 51% a month before.
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