Why now is an an ideal time to revisit your strategy on DB transfers
In our final report on the FTSE350 defined benefit (DB) market we examine the transfer value experience of schemes since ‘Freedom and Choice’ and how transfer values will influence the time to endgame.
One consequence of the “Freedom and Choice” reforms was the rapid establishment of a new market for DB pension transfers.
In the years since those reforms were introduced, transfers from DB schemes to defined contribution (DC) schemes surged, but activity appears to have slowed down over the last couple of years due to a number of different factors, including the impact of Covid-19.
While we do not expect DB transfers to return to the heights seen a few years ago, we are now seeing transfer activity returning to pre-pandemic levels. The increase in activity should prompt companies and trustees to revisit this important issue and consider the effectiveness of their strategy for engaging and supporting members.
"Our data shows transfer activity returning to pre-pandemic levels. It is therefore an ideal time for companies and trustees to revisit their strategy for approaching this issue."
Key findings
Additional benefit payments that have been paid out since the ‘Freedom and Choice’ pension reforms.
The reduction in the average time to buyout if 15% of non-retired members transfer their benefits.
The resulting liability saving, relative to the amount required to secure annuities for these members.
Impact on the endgame
One of the key considerations for companies undertaking transfer value exercises, alongside achieving better member outcomes, is the impact that the exercise will have on the DB endgame journey.
A well-run transfer value exercise can have a significant impact on the overall cost and timescales to reach a scheme’s long-term objective.
DB Navigator® is our clear and simple decision making framework that gives you the knowledge, structure and tools to optimise your strategy for tackling the journey towards your defined benefit pension endgame.
Please contact Simon Taylor or Lewys Curteis if you would like to discuss any of the topics in more detail.
More on the DB pensions endgame journey
FTSE350 pensions – DB endgame back on course
Missed part one of this research and analysis series? Download our report, examining how DB schemes have navigated back on course after a dramatic year — and what this means for the future.
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FTSE350 pensions – Covid-19 impact on life expectancy
Read the second report in our series on FTSE350 pension schemes. Find out what impact Covid-19 has had on life expectancy and what this means for the average endgame timeline.
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DB Navigator interactive framework
Our holistic actuarial, investment and pension administration approach gives you the knowledge, structure and tools to optimise your strategy for tackling the journey towards your DB endgame.
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