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Enhanced transfer values

Offering members of a defined benefit scheme choices with their pension benefits carries risk, both for the sponsoring employer and for the member. That’s where we can help.

Members need to understand the impact of their choices so they can consider if an enhanced transfer value (ETV) offer represents a good option for their own financial future and understand the potential benefit of the enhancement being offered. And employers need to ensure members have access to quality advice, which can both demonstrate the benefits of enhanced transfer values to members and assess whether such a transfer is in the best interests of that member.

We understand that by undertaking an enhanced transfer value exercise, companies are looking to control the costs and risks an existing defined benefit scheme has on their own financial future.

Terms of engagement

Before we agree to undertake any work, we will work closely with the employer and, as required, the Trustees of the pension scheme, to agree terms of engagement for the service that is to be provided. These terms of engagement will make it clear that advice is limited to the pension scheme being considered, inclusive of any attached AVC benefits, and the fee that will apply to the advice.

Our preference is to operate on a simple fixed fee basis, whereby a fixed level of fees is paid (usually by the employer) for provision of advice. This fee would be payable whether the advice was to transfer away from the existing scheme or to retain existing scheme benefits.

Information gathering

Following FCA and Pension Regulator guidance in relation to ETV exercises, we follow a broad information gathering exercise for each individual. Although advice is limited to the pension being considered, a full understanding of the personal and financial circumstances, tax, National Insurance and benefit position of each individual is vital in order to demonstrate that the advice provided is suitable. Where the advice is to transfer, we also consider any existing personal pensions held by the individual as a possible vehicle for accepting the transfer, before making the personal recommendation.

Provision of advice

Our advice to members is based on what is in their best interests.

Although it could be expected that a well-designed ETV exercise will have a relatively high take up, it is clear that there will be circumstances in which it is not advisable for a member to transfer from the scheme.

We provide members with a personal recommendation, expressed in clear and unambiguous terms, in relation to the advice on whether or not to transfer, and, if the advice is to transfer, the receiving product and the funds into which the member is being advised to invest.

If you are thinking of offering an enhanced transfer value exercise and would like early discussions, in conjunction with the scheme trustees and other advisers, one of our transfer specialists can help ensure members are provided with appropriate, professional advice, at a known fixed fee for the employer.