A 64-year-old with a £10,000 a year DB pot would be able to get £213,000 if he transferred to a DC scheme, data from Xafinity has suggested.
The employee benefits firm’s analysis showed that values have varied by more than 15 per cent during the past 12 months, from a minimum of approximately £185,000 to a maximum of approximately £215,000.
Paul Darlow, head of proposition development at Xafinity, said: “Transferring secure DB pensions will not be in the best interests of most members.
“However it is potentially attractive to some members for whom the greater flexibility in the DC environment outweighs the potential loss of certainty.”
The figures came from calculations based on Xafinity’s new transfer value index, which has been created to calculate how much DB members would be entitled to if they transferred to a DC pot.
Month by month, the Xafinity Transfer Value Index tracks the transfer value that would be provided by the average DB scheme to a member aged 64 who is currently entitled to a pension of £10,000 each year starting at age 65 – and which increases each year in line with inflation.
“I hope that the index will provide useful information to pension scheme members considering their retirement options,” Mr Darlow said.
“Members who are interested in transferring their benefits will need to contact their scheme to request a transfer value quotation.”
Background
People with DB pension pots can transfer them to a DC scheme but will be required to prove to the trustees that they have sought independent financial advice first if the transfer value exceeds £30,000.
However, a large number of advice firms – including some networks – have said they will not be facilitating such transfers if they do not believe it is in the client’s best interests. Last week a letter from the PFS warned members not to agree to DB to DC transfers if they did not think it was right for the client.
Adviser view
John Broome Saunders, a consultant for London-based Broadstone Pensions & Investments, said: “Quite rightfully taking advice should be a key step in the process, but actually finding an adviser who is happy to provide advice on such a transfer is likely to be difficult.
“Frankly, it will be a miracle if anybody from a DB scheme manages to transfer, given the impediments that appear to be looming.”
