Nearly one-in-five Defined Benefit Scheme members given access to free financial advice have transferred out of their scheme to access flexible retirement options available through a defined contribution (DC) pot, according to research by Willis Towers Watson.

The company’s study of 15,700 members of DB schemes found that where members of defined benefit (DB) pension schemes have been given access to advice, nearly one-in-five have shifted funds out of their scheme to a DC scheme.

The research looked at thousands of DB scheme members who have been offered independent financial advice at the expense of their pension scheme’s sponsoring employer since April 2015. All of these members were aged 55 or over but had not started drawing their pension. The research, which uses data supplied by leading financial advisory firms, found that:

• 50% took up the offer to speak to a financial adviser;
• Of those who spoke to an adviser, over a third (36%) chose to transfer out of their DB scheme;
• 45% of those transferring bought an annuity, 35% chose to take their funds over time through drawdown and 20% took the majority of their new DC fund as cash.

Stewart Patterson, head of liability management at Willis Towers Watson, said: “Members of DB schemes don’t always realise that ‘pension freedom’ does not automatically extend to them, still less that they would usually have to take financial advice before being allowed to take advantage of it*. The cost of this advice can put people off examining their options, so it will make a big difference if the employer pays for this.

“Anyone considering giving up a DB pension should think carefully before doing so, but many DB members will like having the choice. It’s common for people to have several DB pensions from different employers – so transferring one pension can sometimes be about getting a mixture of stable lifetime income and savings that the individual can dip into as they wish.”

The survey data suggests that members with bigger DB pensions were more likely to transfer out. Members with a transfer value of over £250,000 were the most likely to transfer out, with a take-up rate 10% higher than the overall group.

Most of the members covered by the survey were offered free advice as part of a one-off exercise run by their scheme. However, some of the schemes included transfer values and details of the options in standard retirement statements, with an offer of paid-for financial advice if the member wanted to consider taking the transfer value instead of retiring in the scheme. In these cases, the survey found that over three-quarters (78%) of members who spoke to an adviser transferred their benefits.