Clerical Medical has brought out a S32 bulk buy-out plan to take advantage of opportunities within the pension transfer market as a result of the trend for the winding up of final salary schemes.
Clerical Medical says final salary scheme wind-ups are being driven by factors such as restructuring within companies, mergers and takeovers, management buy-outs and insolvencies. It believes the long-term trend towards defined contribution schemes is unlikely to stop and has designed the trustee buy-out solutions plan in response.
The plan accepts transfers from contracted in and contracted out money purchase and final salary schemes. The minimum transfer value per scheme is £3,000 and there is no initial charge or policy charge. An annual management charge is made but this is scheme specific, depending on factors such as the age, transfer values and fund choices of each member. The cost of providing for guaranteed minimum pensions and commission is paid for through an increase in the annual management charge. There are no penalties for transfer or early retirement.
The plan provides access to 25 Clerical Medical funds, including with-profits and three lifestyle options, plus 14 externally managed funds from Newton, Schroders and UBS. Trustees with employers who want to set up a different range of fund choices for different departments within the company can establish different tranches for each category of employee. These will have different annual management charges and different commission levels.
Mike Fosberry, head of financial services at pension consultants Smith & Williamson, thinks there will be some demand for Clerical Medical's plan among schemes that are already winding up and among insolvent employers. However, he believes the government's new provisions on scheme wind-ups, which guarantee the payment of members' existing entitlements, will make total buyout arrangements more popular for employers who have yet to make the switch to defined contributions.