Standard Life is warning that the Department for Work and Pensions’ new measures for calculating transfer values maintain the status quo of unrealistic and outdated actuarial assumptions.
It has been highly critical of the way the actuarial profession has calculated values for transfers from defined-benefit schemes to personal pensions, arguing it has set unreasonable rates of investment return and used mortality rates that “would not look out of place in post-war Britain”.
The measures are designed to give more responsibility to trustees so TVs are calculated on a scheme basis rather than one-size-fits-all calculations.
But Standard says trustees will continue to take advice from the scheme actuary on what assumptions should be made. It says discretion should be taken away from scheme actuaries.
Standard says IFAs are also left in a very difficult position when employers offer cash inducements on top of the TV. The DWP is understood to be looking at this practice.
Head of pensions policy John Lawson says: “Employers with DB schemes are likely to continue offering bungs to encourage ex-members and even current members to transfer because transfer values remain miserly. This makes like difficult for advisers.”
Aegon Scottish Equitable head of pensions development Rachel Vahey says: “The actuarial assumptions need updating but we are quite pleased that transfer values will be calculated based on the position of the scheme.”