After the news about Carillion broke there were reports of scammers circling scheme members to coerce transfers. However, Mr Price said this would not affect some members, as once the schemes enter the PPF assessment, which is a lengthy process, members cannot transfer out.
Mr Dowsey added: “The only people who can take transfer values are those for whom the transfer process has already been set in motion and have made a valid application to transfer, prior to the assessment date.”
Key Points
- The collapse of Carillion has left many wondering what will happen to the pension scheme
- Scammers have reportedly been circling the company’s DB scheme members
- Many DB schemes are in deficit due to gilt yields being low
However, there is still a danger that dishonest individuals could target members whose schemes have not entered the PPF. Employees, or more likely former employees, of firms may be worried about the state of their final salary scheme or sponsoring employer.
Scheme benefit
If a member or adviser wants to track the health of a scheme there are several ways to do so. Each DB scheme should issue an annual summary, which gives an idea of secure funding levels. Members can also also ask for a triennial valuation report but this is published every three years. This figure is also likely to be the most accurate and is what is used in negotiations with companies over funding. Alternatively, IFAs and members can use publicly available information for listed companies.
However, under the International Accounting Standard (IAS) rules used for public accounts, DB scheme liabilities can be significantly inflated due to the calculation requiring "high quality" bond yields as a discount rate. Under quantitative easing, such yields have been forced down, making current funding levels seem far worse than they realistically are. Yields are also for discount rates in other calculations, such as triennial reports, but have less of an impact than under IAS19.
Should a client be so concerned as to demand a transfer, it may be a suitable option particularly for a single person with no dependents. Should they die, DB scheme benefits, or even PPF benefits, cannot be passed on. If they transfer to a defined contribution (DC) scheme, the money could become part of the estate. However – as many advisers have realised – no two transfers are the same.
Mr Price said: “Advisers need to look at the benefits members have from the DB scheme and other benefits outside the scheme; look at the transfer value that is being offered and see if the individual was to transfer out, whether they could secure benefits as good as what they could get in that arrangement.”
