Corporate Adviser Summit: Enhanced transfer benefits outweigh risks, say advisers

Enhanced transfer programmes from final salary schemes are laden with risk, but done properly can reduce liabilities, according to speakers and delegates at the Corporate Adviser Summit.

But experts said they expected to see less enhanced transfer activity in future, despite a perceived popularity of the solution, in the coming months in part because of regulatory and funding issues.

Asked on their views as to the riskiness of enhanced transfer programmes, a quarter of delegates said done properly they are absolutely watertight for advisers, employees and employers. A further 53 per cent said they carry some risk but the benefits for employers outweigh the risks. Nine per cent said they are very risky and they would not get involved in them and a further 13 per cent thought they could be the next pensions misselling scandal.

Keith Barton, chairman of the Association of Consulting Actuaries said: “Provided it is communicated properly and members have access to individual advice I don’t have a problem with it. I have always found it strange that trustees are happy to offer transfers that aren’t enhanced, but as soon as you offer an enhanced one they get upset about it. One of the difficulties in the short term will be that funding levels will have fallen, so many schemes will be struggling to pay an unenhanced transfer value let alone an enhanced one. That may make this an issue that has gone away. Where you do see benefits however are as part of the clean-up prior to enhanced transfer.”

Robin Ellison, head of strategic development, pensions at Pinsent Masons said: “I have been in three big transfer programmes and in each case take-up was tiny, making it not worthwhile. The risk is transferred to IFAs. Sensibly IFAs are super cautious about this which means they end up not transferring many people. for this reason I think it is yesterday’s news, despite all the marketing about it at the present.”

Andy Marchant, managing director, corporate pensions Aegon Scottish Equitable said: “The FSA have made it very clear they do not expect to see a direct offer approach here. They want to see people getting individual financial advice so a number of advisers are backing away from it. But there are other advisers who do offer a full advice proposition who will still continue to offer programmes, although the pace of it is slowing.”

Steve Folkard, “The FSA has made its position clear, and while they can’t stop it happening, where it does there is a real chance of enforcement action. There is still an issue over how strongly trustees are negotiating the covenant with employers if they have got the spare cash to pay enhanced transfers. And there is the conflict of interest point, particularly when you look at some of the trustee membership who are making these decisions.”