• Once the adviser has been appointed, he will usually have to write to the scheme administrator for more information as there is no standard information sheet for administrators to provide.
• Most administrators have servicing standards which promise a reply within upwards of 10 days, so if there is a follow up question after they have replied, the information gathering will take more than a month.
It is rare for the adviser to get all of the required data within two months of the CETV being calculated, and there then arises the small matter of analysing the data and issuing a transfer value analysis report and a suitability letter. We aim to turn around reports within five days, although there will be times when the report takes a little longer.
Once the report has been issued the member must have time to read it and to consider their options. These include, a decision to defer consideration of the transfer pending certain events, such as finding a new job or generating consultancy earnings.
Finally, the receiving scheme will need to complete paperwork before applying for the CETV from the transferring scheme.
Deciding whether a transfer always the best advice involves several considerations.
If a transfer was always the best advice there would be no need for a PTS. Members of DB schemes need to understand what they are giving up before they give it up. Equally important is advisers need to understand what the client’s real drivers are.
Generally speaking, most people want to achieve a bigger pension by transferring and an analysis of the ‘critical yield’ needed will help to determine how likely this is to be achieved. However, there are many other factors to be considered.
Critical yield
When calculating the transfer value the scheme actuary has to decide how much they need to ‘save up’ to secure the member’s pension.
In doing this they make a large number of assumptions:
• How much will the pension increase between the date of leaving and the date of payment? In the vast majority of schemes increases are determined by inflation, measured by either RPI or CPI, so assumptions have to be made about future inflation.
