While market volatility may have made clients reticent about switching or consolidating pensions in the past, they may now be more agreeable. Perhaps their existing plans might be performing poorly, or they may have taken more time to consider their future income needs and feel like now is the time to get their finances in order.
It’s important to say this article is not talking about DB-DC transfers but defined contribution to defined contribution which the regulator defines as a pension switch.
I think there are several forces driving the need to consider pension switching for your clients:
First up PROD can absolutely be a driving force behind examining your client bank. By reviewing existing arrangements, you may realise some of your clients are mapped to a solution that no longer meets their needs so they may need to consider a switch to one that does.
You may have clients who have moved jobs several times and now have several dormant pots with old employers. They may even have an ongoing fixed charge and other high charges which are effectively reducing the value of that pot over time. These clients are likely to benefit from a switch.
You may have dormant clients. Ones you haven’t heard from for a few years as they just wanted their pension set up on a transactional basis. Now is a good time to try and reconnect with them. The market volatility we saw in 2020 may have made some of them feel nervous and they may be looking at reviewing their retirement plans. Some may even have succumbed to the temptation to switch their funds at the bottom of the market and are now regretting their decision.
Your active clients may also be feeling jittery about market performance and taking stock of their retirement plans so may be more open to considering a pension switch - of course assuming it’s in their best interests.
The issue of poor service levels from providers is also an issue. Some providers reacted better than others to moving completely online when we moved into lockdown and in some cases advisers and their clients are still receiving a poor customer experience. There could be better solutions out there for you and your clients.
Remember providers are required to issue wake up packs from age 50 and then at least every five years until the entire pot has been crystallised. These provide ideal opportunities for you to re-engage with clients and make sure their retirement planning strategy still meets their needs.
If you’re aware of when your client’s mortgage will be paid off, and even if you don’t you could always ask them, or perhaps their interest rate has reduced, then this could mean they have spare capital which they could use more tax efficiently by increasing contributions to their pension. Again, this is another great excuse to contact clients and discuss their pension plans which may include the benefit of switching.
So, there are lots of opportunities for pension switches so long as it matches the needs and objectives of your clients and is in their best interests.