However, only a handful of pension schemes currently offer members a partial transfer option. Given the rarity of partial transfers, members and advisers do not typically ask the pension scheme if they do offer, or would consider offering, partial transfers.
Changing the resistance
Which leaves it with the pension scheme trustees to offer the option to members.
While not many schemes currently offer partial transfers, more than 25 per cent of our pension scheme trustees are currently considering or are implementing partial transfers. At our recent annual conference, 74 per cent of attendees agreed that all schemes should offer partial transfers.
This feels like a change in the wind for pension schemes and is great news for members. Where partial transfers may have previously lain on the ‘too difficult’ pile, our trustees are facing up to the challenge and we are ready to take this step with them.
In changing mindsets about the practicalities of partial transfers it has been useful to do some “myth busting”.
1) Partial transfers are new in the industry and we do not want to be first to do something.
Partial transfers have been permitted in pension schemes since 2006. They are not new and you will not be first. We have clients that have been offering partial transfers to their members for years.
2) Partial transfers are attractive only for the highest paid directors
Historically, we agree, the highest paid directors were those taking individual advice and, as a result, were more tuned into their pension options. These advisers would investigate partial transfers as a way to manage their unique circumstances – for example, they may have complicated tax affairs, be at risk of capped benefits in the Pension Protection Fund or have higher risk tolerances.
However, many members have built up pensions over a long career and would be open to greater “diversity”. The popularity of transfer values since pension freedoms were introduced in 2015 have not been solely the stomping ground of the highest paid directors but have encompassed pension scheme members with benefits of all sizes.
3) Members will not understand
Members must understand the options they are being given. Effective communication from the pension scheme trustees is crucial, with support from individual advice (which let’s not forget is a requirement for pension transfers over £30k). If these two things work well there is no reason to believe members will not understand.
Perhaps a member might even find a partial transfer easier to understand than making an all or nothing decision in relation to their pension scheme security?
4) It will be too difficult and expensive to administer
