Government relaxes advice for small DB transfers

The government is to allow people approaching retirement with small defined benefit (DB) pots, valued at less than £30,000, to transfer them to defined contribution (DC) pensions, without the need for authorised financial advice.

The change replaces the previous requirement, where an exemption from advice only applied if an individual’s total pension wealth from all sources was £30,000 or less. Towers Watson senior consultant, Stephen Green, commented: “For many people approaching retirement at 65, a transfer value of £30,000 may currently correspond to a pension of £1,500 a year or a little less; if bond yields rise, bigger annual pensions will fit within this limit.” He added that the change would make life easier for trustees, as they will not have to look at an individual’s total pension wealth. Green said that while transferring from a DB scheme was not a decision to be taken lightly, in some cases it might make sense to swap a small pension for a pot of capital.