Unlike a number of advisers in the enhanced transfer value space, I have ongoing concerns with projects that allow the member to take the enhancement offered to them as cash.
I have had numerous discussions with the FSA on this point and despite the fact that our position continues to cost us revenue, we have held an anti-cash stance when other advisers both corporate and individual see cash as a way of improving take-up.
However, the pension industry remains acutely aware that any solution to reduce pension liabilities will more than likely be seized with open arms as a way of helping employers reduce potentially crippling pension liabilities. For these companies, it is vital that any such exercise is run thorThe pension industry is aware that any solution to reduce pension liabilities will more than likely be seized with open arms as a way of helping employers red-uce potentially crippling pen-sion liabilitiesoughly and allows indiv-iduals members to reach an informed decision.
I concede that there is certainly a place for cash enhancements, notably where the cash is in excess of the total transfer amount needed to provide the member with a realistic chance of matching or exceeding the projected scheme benefits at retirement and also where the member’s current finan-cial circumstances make imme-diate cash more important than future pension.
A typical example here will be the significant number of members with high credit card or store card debts that they are struggling to repay. For them, even a modest amount of cash now could critically improve their situation.
In this case, the member needs to understand the additional monthly contributions needed to top them back up to a full benefit.
There is a point where both company and member can benefit from cash enhancement. Provided the member understands the risks that they are taking, has enough risk appetite to accept those risks and has an enhancement from the company that is generous enough to give them a very good chance of at least matching the benefits given up, then a win/win is possible.
Care is needed not to disadvantage a significant number of employers or employees.