Thousands of retirement savers with defined benefit pensions are asking financial experts to work out whether switching schemes makes financial sense for them.
One firm, Mercer, says 22,000 direct benefit pension savers contacted them to discuss their savings last year.
The company expects even more inquiries as employers and pension trustees relax the rules about leaving their schemes.
The calls for pension advice have mushroomed since the announcement and introduction of flexible access for defined contribution pensions.
The government has restricted civil servants and public sector workers from transferring their direct benefit pensions to other schemes, but private employees can still switch pensions if they wish.
Calls up two-thirds
A direct benefit pension generally pays benefits in line with the retirement savers final salary.
A defined contribution scheme is typically locked in to the value of the fund on the date of retirement.
Switching from a direct benefit pension to a defined contribution scheme can mean losing other benefits, such as guaranteed annuity rates and payments to widows.
Mercer’s Matthew Demwell confirmed pension transfer inquiries from direct benefit savers have increased by almost two-thirds during 2014.
“The number of inquiries has increased hugely in recent months,” he said. “The calls are coming from the savers and are not instigated by employers or scheme trustees.
“It seems likely that news coverage of flexible access for defined contribution pensions has prompted retirement savers to investigate whether making a switch would be financially feasible for them.”
Demwell also pointed out that these callers were seeking quotations and transfer values.
Financial advice costs
“How many follow up on the call and actually make a transfer out of their current scheme remains to be seen,” he said.
“Many who will have to pay fees to financial advisers to help them make a transfer will likely stay where they are, especially if their pots are average.”
Although the government-backed Pension Wise service offers free pension advice to retirement savers, going to an independent financial adviser could mean paying an average fee of around £3,000 for transfer calculations and investment advice.
“For most of these pension savers, staying where they are is the best bet, but now people have freedom of choice, they will make their own decisions and it is clear the market will never be the same again,” said Demwell.
However, if employees leave a company pension scheme, this will help employers manage their costs, he added.
