RP Forum: ‘Partial transfers are not always right for a client’

Hannah Godfrey reports...

Though partial defined benefit (DB) transfers can be seen as a “perfect solution”, according to Andrew Tully, having such an option available does not necessarily make it right for a client.

Speaking at the 2019 Retirement Planner Forum on Friday (14 June), the Canada Life technical director told delegates partial transfers should not be seen as a silver bullet to deal with the issues surrounding pension transfers.

Tully said partial transfers were often talked about as being the “perfect solution” to difficult situations relating to pension transfers. And theoretically, he added, allowing clients to find a mid-point between a complete transfer and staying in a scheme could make sense.

Just because a pension scheme offers a partial transfer as an option, he continued, however, it does not necessarily make it the right choice for a client.

“If a scheme offers 50/50 [50% transfer, 50% remain in scheme], you still have to go through all your work to see if it is appropriate for what your client needs,” he said.

“Is it any more appropriate than no transfer or a full transfer? Just because a scheme offers partial transfers, it doesn’t make it necessarily the right solution.”

Tully also suggested a particular offer made by a scheme could be wrong for the client – for example, a scheme may offer a 50/50 transfer, but an 80/20 split might be more appropriate.

“If a scheme doesn’t offer that, it doesn’t necessarily help for that situation,” he added.

‘Reduce ongoing risk’

Despite his reluctance to see partial transfers as a universal solution to DB transfer problems, Tully said it could prove beneficial for consumers if more schemes at least gave members the option.

“For you to be able to help your clients move some money away and leave some guaranteed essential expenditure, it might reduce the ongoing risk for the client because they know they have a certain amount of guaranteed income for life,” he added

Nevertheless, Tully acknowledged offering such an option was not easy, noting partial transfers were typically offered by big multinational companies that can afford the additional actuarial and administrative costs such an option would bring.