Developing the firm’s pension transfer niche has helped boost annual income from £360,000 to more than £1 million since Downs last appeared on the New Model Adviser® cover in 2011. But she rebuts any challenge to her increasingly favourable stance on final salary transfers.
Last year, Downs wrote a book: Your final salary pension options: the truth behind the myth. ‘One of the biggest myths is that final salary pension benefits are guaranteed,’ she says.
‘There are no guarantees. If you have a £70,000 a year pension and the scheme fails, which has happened many times, and it goes into the Pension Protection Fund (PPF), you could end up with less than half the amount. That is particularly true for high earners as the PPF cushion is capped depending on age.
‘Many funding shortfalls in companies are staggering, but there is little information about the overall health of schemes unless you know where to dig. Another myth is that when clients transfer out, this makes them vulnerable to stock market falls.
‘But I can predict my portfolios’ risk-adjusted performance accurately over long periods. I can also control the risk with a highly blended portfolio.’
Downs says she receives around 17 enquiries about transfers a year, of which around 15 go ahead with the transfer following her advice process.
The position of the Financial Conduct Authority (FCA) is that an adviser should start from the assumption a defined benefit pension transfer will be unsuitable. Does she disagree?
Downs says much of the poor transfer advice the FCA has identified has been due to the unprofessionalism of the advisers concerned, rather than any fundamental problem with the transfer process if followed correctly.
‘We need to fix the human not the computer,’ she says. ‘I have built my own systems and 10-stage methodology to identify whether transferring is right for the individual. The headline result is a seven-page report explaining our analysis.
‘As well as assessing the individual’s holistic finances, we look at all the technical details of the transferred pension options. These include inherited flexi-access drawdown (FAD); or a nominated FAD with no minimum age for access; minimum access for a Sipp; and tax-free income from drawdown for the client and their spouse and children.
‘My first step is to judge whether the transfer value is a good one. I investigate and judge the ongoing funding position of the scheme. I pull the data together to show the effect of staying with the scheme or transferring at various ages, assuming 4% growth. These numbers will speak for themselves.
‘Plus, I have each case reviewed by an external compliance company specialising in final salary pension transfers – Haven Risk Management – before I meet the client again.’