- Clearly members should only consider taking the transfer value if it offers realistic value, relative to the benefits being foregone in the final salary pension scheme. Given the level of underfunding prevalent in most final salary schemes and the commensurate cut back of transfer values to reflect this, in recent years the financial equation hasn’t been right for members and as such very few transfers have taken place.
There has been a huge amount of what I can only describe as ‘hype’ in the popular press and financial magazines over recent months, almost wholly negative, about the practice of employers topping up final salary scheme transfer values to allow members to exercise a real choice in relation to their pension benefits. I wouldn’t wish to suggest that reporting on this matter approaches the worst excesses of the fourth estate (“Freddie Starr ate my Hamster” or “London bus found on Moon” for example) but headlines such as “Bribes offered to quit final salary schemes”1 and “Regulator launches probe into growing 'cash for company pensions' scandal”2 certainly leave scope for a more considered and balanced assessment of the issues. Whilst I have no doubt that as in all areas of life and business some people will attempt to circumvent rules and practices to arrive at a result which has been achieved ‘on the cheap’ it is disingenuous to take this minority as representative of the whole. There may indeed have been some employers who have tried to provide staff with ’bribes’ to encourage them to leave their final salary scheme and this would indeed be a “scandal.” If this has been the case, no doubt they will over time be identified and made to compensate staff for their actions, however, focussing on this minority only serves to obscure the bigger picture. I find it hard to believe that against the rigorous regulatory background imposed around pension transfers in the mid 90’s that either financial advisers would recommend or insurers would accept transfer values which were patently not in the members’ best interests, having taken account of their specific personal circumstances. If we take this back to its basic constituents I believe that there are 2 fundamental issues. Firstly that any financial package offered represents reasonable value for money to the individual based upon the benefits held in the final salary scheme. Secondly, that individuals are placed in a position to make an informed decision about their options via the provision of quality independent financial advice funded by the employer. Looking at each of these issues in turn, firstly members have a statutory right to receive a transfer value. That transfer value is only one of a number of options open to members in terms of retirement planning. Most importantly members cannot be forced to take a transfer value.