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Actuaries plan changes to transfer values

The Actuarial Profession is planning to change the way pension transfer values are calculated.

It is putting forward a more prescriptive approach to calculating individual transfer values based on bond yields.

Currently, individual transfer values represent the expected cost to the pension sch- eme of providing the benefits which the member is giving up. The change should give greater transparency on the cost of employers’ legal duty to back up their pension promise or, where the employer is insolvent, the cost to the Pension Protection Fund.

Actuarial Profession pensions board chairman Wendy Beaver says: “The new guidance is an important and necessary change to reflect the new pensions environment.

“Trustees will need to decide, in the context of the new rules governing pensions, how the calculated transfer value should reflect the funding level of the scheme, the financial strength of the employer, the nature of the benefit promise and the support of the Pension Protection Fund. It is right that this should be reflected in higher transfer payments to early leavers where appropriate.”

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