DBAAT Myth #1
DBAAT Myth #1
When a consumer only has one guaranteed pension, is it possible to give suitable advice to transfer it to a flexible drawdown pension plan at retirement?
Yes.
Who says so??
The FCA.
There is a myth that when assessing advice using the FCA DBAAT, the pension transfer advice will be unsuitable, where the consumer is reliant on that one guaranteed income.
Not true
Myth #1
You might be doing DBAAT reviews in the context of PS22/14 (BSPS redress scheme).
Don’t be driven by mythology. Assess the evidence and apply the guidance.
Look at the facts, as directly translated from FCA guidance:
In other words - have you done extensive, deep and wide cashflow modelling of the consumers plans (single or joint) in retirement and stress-tested them?
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Are these plans sustainable?
Do you have the clients informed consent in accepting your advice?
(a) the consumer can produce the same or similar contribution towards their income needs from the proposed arrangement (the pension transfer amount and other assets);?
and
(b) the consumer has the requisite capacity for loss, taking into account the impact of the factors considered on the sustainability of the proposed arrangement.
If the answer to (a) and (b) is ‘yes’, conclude that the consumer is not likely to be reliant on income from the alternative Scheme.
And the advice is suitable (in this aspect), as assessed by the DBAAT.
Myth #1
It is mythology to suggest that good retirement planning is going to automatically fail the DBAAT assessment automatically.
If you have collected sufficient evidence to do a deep and detailed cash flow analysis of a client's retirement plans and applied rigorous stress testing on the alternative advised proposal, it is likely that you will have had this (part of the DBAAT assessment) assessed as suitable.
Evidence-based assessments - not mythology.
If you need help with your DBAAT mythology drop me a line
expertpensionsconsulting.com
Wealth preservation for successful families
1 年It's not a myth that a DB transfer is usually unsuitable for most people. There are, however, rare exceptions to that rule where it is the optimum solution for achieving your primary objective. The correct approach for those rare exceptions is a proper financial plan based on a detailed lifetime cash flow analysis.
Regulatory Consultant
1 年Nicely explained, John. We just the FCA’s own reviewers to adopt this technique. And then there’s the almost hysterical response a client-firm of mine got from a FOS adjudicator in reaction to a report I produced for them on a case…
Account Director - Regulatory Services | Outsourcing | Data Cleansing | Consumer Credit | Remediation and Rectification
1 年All too often firms don't do their fact finding and document it to evidence how a client is achieving their income needs in retirement. Which is why so many files fail the DBAAT. I agree it is possible to achieve suitable advice, but the adviser needs to put all the work in as you've set out.