11th December 2009, London: Pension Capital Strategies Ltd (PCS) support the need for focus on Employee Transfer Values (ETVs) and the need to ensure appropriate practices. PCS agree with the Regulator that trustees should be vigilant and exercise careful scrutiny over transfer incentive exercises and that it is important that proper processes are put in place, including the provision of independent financial advice, to ensure that pension scheme members are properly informed about the choices they have.
However, Charles Cowling, Managing Director, PCS, says "We are disappointed with the Regulator's implication that transfer incentive exercises as a whole are inappropriate, rather than there are inappropriate practices that need to be stopped. We do not agree that 'Trustees should start from the presumption that such exercises and transfers are not in member interests'. Nor do we agree that 'the company's gain is likely to be the member's loss'. This simplistic view does not reflect the likely reality of the large majority of cases".
PCS believe there are many reasons why taking a fair and reasonable transfer value (which may or may not include a separate cash incentive) could be in member's interests. These will vary from case to case but can include one or more of the following:
Where there is a cash incentive included as part of the exercise then there will be several more reasons why a transfer could be in the member's interests:
Charles Cowling concludes, "We have handled many pension scheme transfer cases and these are just some of the reasons given by members why a transfer can be in their interests. For the Pensions Regulator to suggest otherwise is, we believe, unhelpful - and potentially detrimental to pension scheme members. In particular, transfer values often represent an important way for trustees and employers to manage down the huge risks in their pension schemes.
"PCS believe members' interests would be better protected if the Regulator focused on improving transfer values offered by trustees and ensuring proper practice on transfer incentive exercises. But that should not mean avoiding transfer incentive exercises. It is important to remember that done well a transfer incentive exercise can be equally beneficial for many members as well as employers".
Charles Cowling 07920 834047
Isabella Young 07920 586032
About Pension Capital Strategies
Pension Capital Strategies (PCS) was established in 2006 to help companies to manage their Defined Benefit pension obligations, offering advice on managing scheme assets and liabilities, on communication with trustees and on finding the right funding solutions.
A subsidiary of the Jardine Lloyd Thompson Group, PCS can draw upon skills and experience in the areas of corporate finance, tax, capital markets, asset management, actuarial and general pension regulation and practice to provide strategic advice and practical answers.