UK - Enhanced transfer values can offer a genuine opportunity for members to receive a bigger pension and should not be automatically rejected, actuaries have claimed.
In a presentation at the Actuarial Profession's 2008 pensions convention in Ireland, Linda Bell, a pensions actuary, told delegates "low offers and poor communication" meant transfers had "attracted bad publicity in the past".
However, she suggested many companies are now offering enhanced transfer values "that were worth considering", as they could offer a "genuine" chance of a higher pension and provide greater flexibility on retirement age and the type of benefits taken.
She said: "We have seen companies receive bad publicity for offering deals that were not considered fair. Now, they are offering more generous deals and if they are done well, all parties involved can benefit."
Bell pointed out although "many schemes have been offering poor terms to those considering their option to transfer", it is a positive step for members if "some companies are now pushing trustees to improve the terms for members, or paying directly to enhance them".
But she warned good communication by trustees and companies to members was essential for a successful transfer exercise, and suggested members should seek independent advice as members need to determine whether they would benefit from a transfer value and carefully consider the additional investment risk they face by moving from a defined benefit (DB) to a defined contribution (DC) scheme.
Bell said: "The message I would like to give people is that they should not dismiss the offer of a transfer because it is possible that they could benefit.
"Most importantly, I would advise them to read communications properly and seek independent advice because it is a difficult decision for anyone to make on your own and doing nothing is not necessarily the right answer," she added.
That said, Stewart Ritchie, the president of the UK's Faculty of Actuaries, noted "any transfer from DB to DC results in a transfer of risk to the individual concerned".
He said: "An enhancement to the transfer value increases the likelihood that the transfer will happen, but the transfer value is still likely to be less than needed to secure the same benefits with a life office. It remains vital that the individual understands and explicitly accepts the risk."
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