Advisers expect big increase in FTSE100 firms giving incentives to leave final salary schemes

A significant increase in FTSE100 companies offering enhanced transfers for deferred members to leave final salary plans is expected, according to research carried out by Prudential.

The survey, conducted across a range of corporate IFAs and EBCs, found an unsurprising increase in the likelihood of staff accepting transfer offers if cash incentives are offered as well.

Only 4 per cent of advisers predicted a 50 per cent or more take-up rate for deferred members of the pension schemes of FTSE 250 and FTSE100 companies where no incentive is offered.

Five times as many advisers thought such a take-up rate would be possible if a cash incentive is offered.

As many as 88 per cent of advisers thought more than half of such deals would require face-to-face advice paid for by advisers. The research also found advisers expected around £800m of transfers into DC plans could be achieved in 2009, implying £2bn of offers from schemes.

EBCs were slightly more pessimistic on the prospects for the size of the market than corporate IFAs. Reputational risk was seen as the biggest hurdle to going ahead with ETV programmes for FTSE100 companies, with lack of capital the biggest obstacle for SMEs and FTSE250 employers.

Intermediaries cited better use of technology at the front end of the process as the most significant development required to make ETV exercises more cost effective.

More than a third of respondents, 37 per cent, said they saw the ETV market as part of their key long-term growth strategy and a further 19 per cent saw it as a short-term market opportunity.

Just 3 per cent said they were thinking of withdrawing from this market and 41 per cent felt ETVs were an additional but not significant future revenue scheme.

Asked what represents a fair offer to members, 28 per cent opted for enhanced up to an unreduced CETV, 26 per cent said full accounting reserve, 23 per cent said 100 per cent of funding liability, 10 per cent said buyout cost and 13 per cent said an arbitrary cash amount.

Martyn Phillips, director of employee benefit solutions at Prudential, says: “Intermediaries expect a significant breakthrough into the FTSE100 sector of employers undertaking enhanced transfer value exercises.

“The research shows there is considerable optimism amongst intermediaries given the significant current hurdles. EBCs generally think ETV deals will stall until we emerge out of the downturn.”