Why Consider Enhanced Transfer Values
Enhanced Transfer Values provide an alternative solution for trustees and sponsoring employers who are looking to de-risk their pension scheme, but are not in a position to afford a full buyout, or perhaps even a pensioner buy-in.
Typically, buyout costs are proportionately higher for deferred members who are younger and much harder to predict compared to pensioners (both in terms of longevity risk and the actual benefit they may be entitled to at retirement - accounting for possible cash commutation, currently unknown dependants, etc.). Ultimately, pension schemes are exposed to the associated risks and volatility of costs for a much greater period of time in relation to their deferred members compared with pensioners.
Enhanced Transfers can help schemes to reduce their total risk exposure for these members, while also enabling the members to take more control of their own pension provision.
However, Enhanced Transfers will not be suitable for everyone and any such exercises will rely on a thorough assessment process. For example, ETVs are not likely to benefit older members who are approaching retirement and have the stability of a known level of retirement income.
