Government threat prompts rush for ETVs

Advisers have reported soaring numbers of clients approaching them to arrange enhanced transfer value (ETV) exercises, where members are moved from defined benefit (DB) to DC plans with pots large enough to secure equivalent retirement benefits.

The development follows the government of a change in the law to ban staff from contracting out of DB schemes.

Draft legislation was expected in April, although an initial consultation did not appear until July, by which time companies were already rushing to explore transfer options.

AWD Chase de Vere has quadrupled its ETV tenders this financial year, with eight since April, up from two in Q1. The company has also been approached by a 6,000 deferred member scheme, its largest ever client in the area.

And Alexander Forbes has received 16 ETV enquiries since April, six for schemes with more than 5,000 members, compared to just eight in Q1 – only two for 5,000-member plus plans.

AWD technical director Param Basi said: “There is definitely concern as to whether ETVs are going to be possible in the future."

Alexander Forbes desk head Tim Whiting agreed the “massive snowball” in business has largely been driven by fear of forthcoming legislation.

“The changes have been well flagged and we were expecting them earlier, and that will have cause people to say, ‘let’s get out now’,” he said.

“Regulation or legislation is effective from when people start talking about it, and there has been a noticeable spike in activity in the last few months.”

Raj Mody, a partner at PWC, which chooses ETV advisers on behalf of sponsors, also highlighted increased Pensions Regulator scrutiny of the market, as a factor in leading schemes to take the option sooner, rather than later.