DB pension members crying out for more support from schemes

Two in five DB pension scheme members (39%) are worried they won’t have enough money to see them through retirement, according to new research from Barnett Waddingham. Concerningly, this increases to 46% of those approaching retirement (aged 45-54).

Most worrying is the finding that 13% of DB members said that the rising cost-of-living has made them more likely to transfer out of their DB pension – this is true of 18% of under 40s, and 8% of over 40s. Given any money transferred out of a DB pension wouldn’t be available to members until they reach age 55, these savers are at risk of falling prey to scams.

Support for DB members

Many members display a lack of confidence when it comes to making decisions about their DB pensions. More than one in five (22%) are actively unconfident, rising to 30% of women.

This is likely connected to the polarised landscape of support offered by DB pension schemes. 49% of members have not had any support from their DB scheme to help make decisions about their pension – and concerningly, this rises to 58% of those aged 40+, who need support the most in the run up to retirement.

Comparatively, 51% have had support. Of those:

• 31% have benefited from frequent communication about their options in the years leading up to their planned retirement
• 24% have received financial advice from an independent financial adviser (IFA) appointed by the scheme that they paid for themselves
• 22% have had advice from an IFA the scheme paid for on their behalf.

Of those without support, 40% don’t want any, while 60% would appreciate support from their scheme. Of those who haven’t received support but would like some:

• 43% would like more frequent communications in the run-up to retirement
• 41% want 1-1 guidance sessions provided by a financial adviser or other knowledgeable individual, organised by their scheme
• 32% would want financial advice from an IFA paid for by the scheme, while 22% would be happy to pay for that advice themselves.

The trustee landscape

Looking at the realities for schemes, trustees’ offerings seem largely aligned with the desires from members. 48% DB pension trustees say that their scheme has partnered with a specialist IFA, with the cost of advice met by the scheme or company sponsor, while 40% have done so with the cost met by members. 38% say they have provided a contribution to the member’s own costs of obtaining financial advice. These findings are notably high, and likely led by the predominance of large schemes captured in the survey – smaller schemes generally don’t have such fulsome offerings.

Crucially, a massive 76% of trustees believe that schemes should be partnering with an IFA to support members at retirement, so long as they have the support from the sponsor. Only 22% don’t agree.

Debra Logan, Partner at Barnett Waddingham, comments: “Now more than ever, it’s vital trustees and scheme sponsors are rallying to provide the best support to members. The cost-of-living crisis is creating a ripe space for scammers to prey on those struggling to make ends meet. TPR’s guidance last year gave trustees the power to halt suspicious transfers if there’s a heightened risk it may be part of a scam, but it’s vital members feel empowered to spot scams themselves too. Fundamentally, nobody under 55 could transfer out of their pension into cash – anybody who says they can make that happen is lying.

But there is a clear gap in knowledge and confidence amongst members. Much of this can be solved through better communication and knowledge-sharing, as well as bespoke support from an IFA. It’s positive that there’s a clear alignment amongst members and trustees in favour of offering financial advice via a scheme – the next step is to put that into practice and ensure all members have the tools they need to make the best decisions about their pension.”