Several defined benefit (DB) pension schemes are considering paying for financial advice for their members.
David Pugh, managing partner at employee benefits consultancy Lemonade Reward, said the company is in discussions to provide this service, as requests for cash equivalent transfer values (CETV) increase.
He said: “We are in advanced talks, but we are talking about some of the top hundred top schemes in the country, they look after billions of pounds, they don't make decisions very quickly.”
If the sponsoring employer is looking at a risk reduction exercise to actually save money and reduce risk, then it might be worth paying for certain individuals to get advice, Mr Pugh said.
In its DB pension transfer research, published last week, Lemonade Reward found 81 per cent of employers felt their DB scheme members receive transfer advice they do not understand.
The survey, which contains feedback from 63 companies representing more than 1m members, also showed 44 per cent of employers are receiving between 10 and 100 transfer value requests a month, and 16 per cent more than 100.
This increase in transfer requests “puts a massive burden to the pension schemes” and the sponsoring employers, Mr Pugh argued.
He said: “If they [the schemes] have several hundred people a month getting a CETV, if they're asking for their options, then they have hundreds of advisers speaking to the pensions administration team asking all sorts of questions.
“By an employer facilitating this service, they would have a lot less advisers asking different questions. You only need to ask the questions once, which saves time for the company, saves their money, and from the individual point of view they get a much more cost-effective focused service.”
Lemonade Reward launched a new service to help schemes cope with the transfer demand, available to current and past employees in a deferred DB scheme, which is divided into two steps.
Mr Pugh said: “The first stage is giving information, it’s an initial assessment and that helps screens if it might be in the best interest of the individual to proceed to the more expensive full regulated advice, which is the second stage.”
With the introduction of pension freedoms in 2015, savers have been seeking to take advantage of the high transfer values of DB schemes to move their nest eggs into defined contribution plans.
Figures published by Mercer in April showed that as much as £50bn has been pulled from final salary pension schemes in the last two years.
According to figures released by HM Revenue & Customs, more than £14bn have been unlocked from DC pensions since pension freedoms came into effect.