I half expected current gilt yields to generate a flood of transfers from guaranteed defined benefit schemes to flexible defined contribution schemes.
A transfer just before retirement could pay out 40 times the initial pension, based on a life expectancy of just over 20 years.
Many schemes now proactively quote transfer values, but still relatively few transfers proceed, with anecdotal evidence suggesting that the most significant membership segment transferring are those with very substantial benefits.
Our fickle old friend inertia stops people even considering their options properly, having lulled us into a false sense of security by playing good cop on auto-enrolment
Someone retiring on a DB pension of £50,000 a year may well be tempted by a £2m valuation and can afford to pay for good advice on how to invest that capital.
They can also take some risk, given that they are not likely to starve even if their investments underperform massively.
The option to draw down DC funds flexibly makes a transfer between regimes even more attractive, bypassing rigid annual increases for the ability to spend more in the early, active years of retirement and allowing exceptional lump sums, say to help their children financially, or to invest in a buy-to-let property.
So why isn’t everyone doing it? A recent survey by insurer MetLife found that 75 per cent of over-45s agree that a guaranteed income for life is important, with most advisers suggesting clients should aim for half their retirement income to be guaranteed.
This obviously puts people off transferring, especially if their starting pensions are modest, or if they compare their quotes with the cost of an annuity.
There are also a couple of psychological barriers. Firstly, our fickle old friend inertia stops people even considering their options properly, having lulled us into a false sense of security by playing good cop on auto-enrolment.
Consolidation and partial transfers put forward as funding pressures increase
DB funding levels have not improved over the past years as gilt yields have fallen, the latest edition of the Purple Book shows, with industry figures hailing partial transfers and scheme consolidation as possible solutions.
Secondly, choice overload paralyses people when there are complex options with lots of flexibility, particularly on important issues like their future financial security.
The funny thing is that everyone would gain from more DB to DC transfers. Members get the option of a huge amount of capital with flexibility, and schemes pay out less than their prudent funding reserve.
Perhaps the time has come for more schemes to offer partial transfers, giving members a blend of guaranteed income and flexibility.
A DB to DC transfer is not right for every individual, but a partial transfer option would make it a lot easier for many more people to access the best retirement outcomes.
Hugh Nolan is president of the Society of Pension Professionals and director at consultancy Spence & Partners
