08 September 2006
The UK Actuarial Profession has advised caution when people in
defined benefit pension schemes are offered cash-in-hand payments,
or other inducements, to encourage them to take transfer values out
of their schemes.
Stewart Ritchie, President of the Faculty of Actuaries, said:
"We know that the concept of cash-in-hand inducements, or other
enhancements to transfer values, is becoming increasingly popular
among employers trying to reduce their pension liabilities. This is
clearly good for employers, in controlling their future pensions
costs.
"But what is much less clear is whether it is good for members.
The costs of replicating their benefits outside their schemes may
be much higher than the transfer values offered, even including the
inducements.
"We urge people who receive such offers not to be dazzled by the
prospect of cash today, and to take independent advice. The
Trustees of schemes also have a role to play in ensuring that
people receive as much information as possible on the offer, but
this can be no substitute for individual advice which should be
taken by each member so that they can fully understand the
implications. Just as the employer will have been properly advised,
it is important that the scheme member also gets appropriate
advice."
