Bulk Pension Transfer

The world of pensions and retirement saving is one that is subject to constant change, due to both economic factors and legislation.

Historically, employers provided pensions for their staff on a Defined Benefit (DB), or Final Salary, basis. Benefits were usually linked to an employee’s service and final pay leading up to retirement – if they left employment the benefits accrued to the date of leaving were index linked, offering a degree of inflation proofing. Typically such pension schemes were thought to be worth their weight in gold for the employee, but as schemes grew they became very expensive operations for the employer to maintain.

The late 1980’s and 1990’s saw the growth of Defined Contribution (DC), or Money Purchase, pension provision where the benefits an employee receives at retirement are dependent on a number of factors. These include the level of contributions paid into the scheme by the the employer and employee, the investment returns earned, the management charges taken and the prevailing annuity rates at the time benefits are taken. Since their launch, DC pension schemes are now the route taken by the vast majority of employers for their employees.

In recent years the pensions landscape has changed dramatically through the introduction of Pension Freedoms. These freedoms mean that individuals who choose to access their pension fund, something which is currently possible from age 55, now have far more options available to them in how their retirement savings are paid to them than ever before. However, it is usually only those in DC schemes who can access the full range of options.

This has led to many members of DB schemes feeling they are losing out on a certain degree of flexibility. As a result, employers of such DB schemes have started to look at making the option of a transfer to a DC arrangement available, for those employees who are eligible and who want to take advantage of the freedoms. While transferring from a DB to a DC pension scheme can remove valuable guarantees and protection for employees, economic conditions mean that transfer values are currently at levels that can lead to advisers recommending a transfer, especially when the additional flexibilities are factored in.

For the employer, for every transfer taken from a DB scheme the pension liabilities they are responsible for reduce as do their future funding requirements. As a result, bulk DB transfer exercises have grown in popularity since the introduction of Pension Freedoms, and we have considerable experience in the management of such campaigns. With the FCA and Pension Regulator recognising that the new pension freedoms may be better suited to some members, we can run exercises for eligible individuals advising them personally on the most appropriate course of action.

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