“It’s not at all surprising that there are calls to temporarily suspend DB transfers due to current volatility. While this may make life a little less complex for some DB scheme trustees, it could also have a detrimental impact on some members planning to transfer to draw more flexible pensions in the short term.
“The current market turmoil will have affected the funding position of many DB pension schemes. Some schemes which have adopted close ‘matching’ of their assets to liabilities may find the impact on their funding position is modest and might see limited need to amend their current transfer value basis.
“Others schemes may have seen drops in asset values while liabilities may have risen as interest rates hit an all-time low. For the latter group, paying out transfers may weaken the funding position for remaining members unless transfer values are scaled back. Here, trustees might welcome being able to suspend quoting or paying transfer values until market conditions become more stable.
“The problem with suspending transfers is that it could have a severe impact on those individuals barred from doing so and who planned to start taking flexible benefits. Individuals do have a statutory right to transfer so halting that even temporarily can’t be done lightly.
“Many individuals who might have been considered transferring may now place greater value on the guarantees within their DB pension. But for a minority, being able to invest their transfer into stocks and shares when markets are depressed might have particular appeal. It has always been essential for individuals to seek advice on transferring and the current conditions make this even more valuable.”
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