Pension Capital Strategies Limited (PCS) believes that many companies are still missing out on opportunities to generate significant shareholder value, members are still losing out on the opportunity to take a fair transfer value and some trustees are still missing out on the opportunities to reduce risk and offload pension liabilities.
“It is useful to look at the IAS19 value as a benchmark for considering the relative size and generosity of transfer values. Surprising as it may seem, there are still many companies and trustees offering transfer values which are less than 50% of the IAS19 value. Some are as low as 25% of the IAS19 value,” says Charles Cowling, managing director, PCS.
PCS has researched the transfer values on offer to the directors of FTSE100 companies. PCS found that even amongst FTSE100 company directors, transfer values were surprisingly ungenerous and, for the large majority, consistently below IAS19 levels.
PCS believes now this is the time for companies and trustees to act to avoid all the previous pitfalls and failings on transfer values.
“The deep irony is that there is a rare “win-win” situation for all concerned here. More generous transfer values can benefit companies, trustees and pension scheme members alike. Moreover the idea of giving cash incentive payments to members to encourage transfers-out should also be considered. Provided the member receives independent financial advice, we believe this is a very sensible approach. Done well a transfer value strategy can result in happy members and a significant reduction in pension scheme liabilities,” adds Cowling.
PCS and JLT Benefit Solutions Limited have joined forces to put together a standard process for managing pension liabilities through the sensible use of transfer values. This combines the necessary advice to companies and trustees as well on the provision of all important independent financial advice to members.