LCP has contributed to an LV= discussion paper launched today (Wednesday 5 July) that calls for the industry to start considering the benefits of partial transfers and to take the necessary steps to make them a standard option for the benefit of their members.
Capita Employee Benefits, Hymans Robertson, and JLT Group also contributed to the paper.
LCP partner, Jonathan Camfield, said: “LCP is delighted to have taken part in the production of this paper as this is such an important issue. Partial transfers could be a ‘win win’ for schemes and members, however our research suggests that only 15% of schemes offer partial transfers, perhaps as for many, calculations seem challenging, with administration challenges appearing too difficult and costs too high to overcome.
“We believe these challenges are not insurmountable and are well worth tackling as resulting benefits to members are strong - members receive a base level of DB pension to satisfy their secure income needs, and can convert the remainder into a flexible income and/or tax-attractive family asset. They get the best of both worlds.”
To ensure improved visibility and availability of partial transfers so DB members are able to make the best retirement decision for them, LV= recommends:
- The Government and industry do more to improve member, trustee and scheme understanding of partial transfers, explaining the risks and benefits
- Trustees work with financial advisers to explore practical solutions for members and make partial transfers a standard option
- The Government and regulator provide guidance and support to schemes so that they can confidently offer this option to members
This paper is one of a series from LV= Corporate Solutions which challenges whether existing retirement processes are fit for purpose.