Cashflow Awareness; Transfers out
Managing transfers out of DB pension schemes.
The unpredictability of transfers can be allowed for effectively in a well-constructed approach that includes cashflow matching.
Since Freedom and Choice in 2014, which allows individuals the right to access their pension savings more flexibly, there has been a substantial uptick in transfers out of DB schemes. As gilt yields have fallen, transfer values have risen, offering large and attractive sums to members. There was 50% growth in the volume of transfers out in 2016 alone. Around 2% of scheme assets on average were transferred out with transfers out exceeding pensions in payment for some schemes.
Much has been written in the press on the factors members should think about when deciding whether to transfer. But what about schemes themselves – how should they prepare?