Data crunch: The number of schemes offering partial defined benefit transfers is increasing, with the option being targeted at members with large transfer values, new data show.
However, trustees are mindful of additional administration burdens this process can cause, and have introduced some caveats to prevent it.
According to figures from LCP, 22 per cent of schemes are now offering the feature, which compares with 15 per cent of plans having this option in their rules in 2017.
Setting a minimum amount for partial transfer allows some guarantees that the member will still have safeguarded benefits, but also makes the additional administration costs worthwhile
Jonathan Camfield, LCP
The data from the consultancy firm show that of the partial DB transfers paid out by these schemes over the past two years, in well over half of the cases (60 per cent) the member took 50 per cent of the full transfer value.
The smallest partial transfer taken by members was £400,000 and the average was £1.1m, well above the typical full transfer value registered by LCP in the schemes it administers, of £406,000.
Uptake has been slow
Jonathan Camfield, partner at LCP, explains that schemes that introduced partial transfers three years ago are “finally getting a number of people taking them”.
“It is a slow-burn, but we just expect it to continue to slowly escalate,” he says.
For example, for one scheme in the telecoms sector where this policy was introduced in 2017, after an initial slow start there were seven partial transfers out of a total of 38 transfers in 2018.
One of the main reasons often cited by trustees for not offering this option is the additional administrative complexity and cost – both of setting a partial transfer policy, and of administration if members request several quotations for differing partial transfer amounts.
Minimum value eases burden
However, Mr Camfield says schemes that have opted to offer such a policy have designed this option in a way that avoids the extra burden.
First, they limit it to a single partial DB transfer option of 50 per cent of the full transfer amount, provided to the member as part of any transfer quotation.
Also, defining a minimum full transfer amount of £200,000, for example, allows the trustees to guarantee that the remaining DB pension is reasonably substantial, both as income for the member and as a payment to administer.
Mr Camfield says: “Setting a minimum amount for partial transfer allows some guarantees that the member will still have safeguarded benefits, but also makes the additional administration costs worthwhile.”
