LONDON, 2 September 2008 – “The draft guidance on cash equivalent transfer values will help trustees to meet their new responsibilities under the revised legislation. The key change is that the responsibility for CETV calculations will rest solely with trustees, whereas currently it largely rests with actuaries.  

“Whilst it would have been more helpful to trustees for guidance to have been published more quickly after the regulations were finalised, the draft guidance is clear and sensible. For instance, it rightly supports the view that where a scheme is currently underfunded, but has a robust plan in place to make good the underfunding, then trustees should continue to pay full CETVs to members, rather than reducing to reflect the underfunding.

“Since the draft guidance works, and 1 October is fast approaching, we would discourage the Regulator from making any significant last minute changes to its guidance, which will only inconvenience trustees. As the regulations are final there should be no need to wait for trustees to wait for final guidance before proceeding.

“From members’ perspective, the switch to the new regime should not impact materially on the amounts of transfer values quoted.  Trustees should ensure they have fully considered the relevant areas and have a clear policy on transfer values in place before 1 October 2008, so that there can be a seamless transition to the new regime, with no delays to quotations for members.   

“Bearing in mind the shift in responsibility from actuaries to trustees, trustees should put in place arrangements with their scheme actuaries to monitor their methodology for calculating transfer values, so that it remains reasonable, particularly in turbulent investment markets.

“Employers should be aware that in practice few members accept transfer values at the minimum level determined by trustees ,so employers looking to reduce defined benefit liabilities by encouraging members to transfer should be focussing on what level of enhanced transfer value will have the desired effect.”