Aegon joins providers calling for more partial DB transfers


Aegon has added its name to a list of providers calling for more employers to accept partial transfers out of defined benefit schemes.

While there is currently a statutory right to transfer a pension to another scheme, this right does not apply to partial transfers. The option of a partial transfer has been available since 2006, but most schemes will not facilitate it due to administration costs.

Aegon head of pensions Kate Smith says that partial DB transfers could both alleviate pressure on DB funding deficits and allow scheme members to take advantage of the flexibilities of pension freedoms.

Smith says: “Interest in DB to defined contribution transfers is rocketing due to a combination of the pension freedoms, high transfer values and scare stories about DB sustainability. But choosing whether to give up a guaranteed retirement income for life, even with advice, is a big and complex decision, and many may be put off from taking the ‘all or nothing’ plunge.

“Transferring to DC does provide increased flexibility to take as much or as little retirement income from age 55 as and when it suits the individual. But in return, individuals take on the risk that they might outlive their savings or that a stock market downturn may reduce the value of their savings.

“Although allowed by regulations, many trustees and employers may have ruled out partial transfers because of the administrative complexities they could create. But in today’s climate, partial transfers could be attractive to employers and trustees as they can improve DB schemes’ financial health and the company’s balance sheet. Administrative challenges may not be insurmountable and trustees could draw on inspiration from the pension splitting rules.”

Others backing partial transfers include former pensions minister and Royal London director of policy Steve Webb and Hargreaves Lansdown head of retirement policy Tom McPhail, partly to reduce adviser fears over the liabilities they will face from DB transfers.

A partial transfer would also allow those with a DB transfer value exceeding the DC lifetime allowance of £1m to avoid a tax charge which would otherwise put them off transferring.