Enhanced Transfer Exercise

Over recent years the true cost of pension benefits has become more apparent to employers via disclosure in company accounts under FRS17/IAS19. This has encouraged many employers to seek ways to manage their pension liabilities more pro-actively than in the past.

Companies have concluded that it may be in their interests to offer people genuine choice with regard to the benefits built up in pension schemes. To do this they need to offer them transfer values which properly reflect the underlying benefit. The way to achieve this is to top up the transfer values that can be supported by the scheme to a level which provides members with a real choice about how they want to take their benefits.

This demonstrates a typical comparison of liability values, by age, of buyout cost compared to cash equivalent transfer value and how an enhancement might be beneficial to both parties

Offering people choice carries risk – people need to understand the implications of each of the choices available to them. In order for members to consider if a transfer value and top up represents a realistic equivalent to the value offered by the scheme quality independent financial advice is required. It is in the employers’ interests that any choices made by members can be demonstrated to be informed choices and this is a powerful incentive for companies to meet the cost of that advice. There has also been Pensions Regulator Guidance related to this issue.

We have built up considerable experience assisting employers and trustees through this complex process and have designed modelling tools to assist with financial analysis and explore ‘what if’ scenarios. We have also designed a process to maintain the required level of independence and freedom from conflicts of interest that such exercises require as well as building links to financial advisers with the required skill and qualifications to implement any strategy agreed.