Defined Benefit tvas - first pass

Hi all,

Does anyone use a calculator or piece of software than can give an initial assessment on plausibility of db transfer? I have a case where we would just like an initial sense check before committing to cost of a formal tvas report.  

Do any of you use something like this?

Thanks in advance.



  • richallumrichallum Administrator
    Personally I think you've got to the analysis fully or not at all.  Also, the CY has little to do with the suitability of a transfer these days and only using that is dangerous.

    Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern. Republican.

  • Thanks, that was my gut feeling, but the planner was very keen on getting an initial assessment...
  • HuckoHucko Member
    Catherine, the Standard Life triage document has a table (on page 2) in which it gives some very basic examples of whether a CETV represents 'fair value' and might therefore be worth proceeding to formal analysis/TVAS report stage. This is a bit of an ongoing discussion point in our firm at the moment in terms of whether this initial 'analysis' should be offered or, as Richard suggests, you simply go straight into proper analysis/yes or no transfer recommendation and charge accordingly. The problem with the 'is the CETV fair value and worthy of proceeding to the next stage' question is that if it is not, and you therefore suggest to the client that it does not warrant further investigation, could that be interpreted as advice??
  • richallumrichallum Administrator
    Alistair Cunningham did a very good article in Money Marketing recently on their triage process too. @benjaminfabi has some very good ideas on this, have a look at his recent posts in here.

    Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern. Republican.

  • Use the triage process @Hucko linked properly; understand what it is there for.

    What you're trying to do with triage is determine if the client should be looking at a DB transfer. Is it necessary to take them through a fully chargeable piece of advice, if you can eliminate their suitability for a non-DB income after a short conversation?

    'What are their motivations' is more important than 'is the CETV fair value'. The CETV has to be fair value, because regulations require it to be. It's the stuff around that which matters more.

    I guess to answer the question more directly, I don't believe that you need, or could produce, software to assess the plausibility of a DB transfer. It's a soft facts and objectives led conversation that leads you to conclude if the person in front of you has the right criteria to warrant the risks involved.

    If you listened to the recent Howwow with Rory Percival you'll have heard him say that this sort of triage process isn't, in his opinion, advice. I agree. Done properly, triage is not advice. It is education. So much it is about finding out why a client is in front of you. @richallum has referred to Alistair Cunningham and is right to do so. He says of the client in front of him 'convince me that you aren't most people', a reference to the starting point for assessing suitability. If they can't convince you, then they're probably not suited to a DB transfer.

    To have a good process you have to record clients who go through triage and drop out. Because the consequence is a higher rate of transfers for those who take full advice. You need to show the PI insurers the true picture to avoid a hike in fees.

    You also get clients who are much better prepared to receive, and pay for, a recommendation not to transfer. Because they have been through triage, they understand that they have something valuable and it is worth them paying to find out which is the better option. Let's just not talk about VAT!!
    Benjamin Fabi FPFS
    Chartered Financial Planner 
  • Calvert76Calvert76 Member
    edited July 2017
    Thanks for all the great advice. It is certainly a fascinating area and one I will need to get more involved in.  

    The triage document is really good.  I wish it included a table for single clients too though as this is a main reason for considering... 

    This specific client is divorced and has received a reasonable dc pot on divorce. The DB scheme is small, but would provide an extra degree of certainty on top of her state pension.  She is still a way from retirement.  I think it is probably too early to make this kind of decision, but information is power, so I can see some value in sense checking the figures...
  • I'd say that's the best way to think about it @Calvert76. Give the DB the strength ie 'an extra degree of certainty'. 

    You can take that a step further. Ask the client what she thinks about the security offered by the DB. Frame that within her entire provision, including the now moving target of state pension, against their current retirement income target. She can then make an educated decision about whether it's worth paying to have a full analysis on the DB scheme. She might even decide that she wants to keep it. The option to transfer remains open and 

    I know I said it above but it's worth restating: the important point is that this isn't advice. It's putting the client into an informed position to make a decision about whether to take advice on that particular aspect of planning.

    Benjamin Fabi FPFS
    Chartered Financial Planner 
  • Only thing I'd add is that if the adviser or client are not 100% convinced, it's much better to do nothing and defer the decision to transfer rather than try to convince yourself/the client that a transfer is the best option. By deferring, all options are still on the table for the future and in theory even if the CETV falls it should still represent 'fair value'.

    I've been on the fence about the whole triage process, probably leaning more towards it being advice, but I think @benjaminfabi last sentence swings it back the other way for me now.
    benjaminfabi said: It's putting the client into an informed position to make a decision about whether to take advice on that particular aspect of planning.
    I still think there's a danger the process could slip into being advice not to transfer, but if the advisers understand where the line is and clients are only choosing whether or not to take advice, that can only be a good thing for clients and firms.
    Jonny (paraflex)
  • Hi, yes triage approach. We have only just got permissions for DB transfers and we have adopted a 2 phase approach, with a factual report informing client what the existing DB Scheme is offering and a simple cash flow illustrating a comparison of benefits available where it is against transferring and investing it in a MP scheme to produce the same income, combined with a market crash test. We are using Selectapension to run our own TVAS. then from here we meet with the client again discuss the initial audit and leave it with them to go away and digest, then have a follow up conversation with client once educated to see what they feel they want to do before we go into full blown recommendations and full cash flow to determine viability of transferring to meet objectives and clients individual circumstances. 
  • I'm not sure I agree with everything that has been said so far. Chances are the initial enquiry stems from the client who has probably already found out what the TV is (and a level of greed can set in). They have read enough to know what the 'triggers' are as regards reasons for transferring and in terms of any initial conversation then we are finding they are more than capable of putting together a 'good story' as to why they think transferring is good for them.

    A TV does have to offer a level of 'fair value', but this is in the eyes of the scheme actuary and trustee - it does not necessarily make it 'fair value' in our eyes. We are seeing CY's ranging from 6% to 14%.

    We run on a fixed fee basis for advice in respect of a DB transfer irrespective of the outcome and this is always linked to a full and detailed Lifetime Financial Plan.

    A TVAS is always part of the process and in our view always should be. A DB pension is designed to provide a safe secure income for life. In order for anyone to start to understand what the cost of giving that up is then a TVAS / CY calculation is a really effective way to start. If, going forward, the TVAS becomes a non-requirement I believe there is real danger in key parts of the DB benefit being given up being missed. At least with a TVAS you have to have a wide range of detailed scheme info which is not always provided in any initial information exchange.

    To do the LFP the starting point, for us, is to look at the client's actual expenditure wishes and then run this against the actual DB pension. We then model this against a transfer with appropriate investment returns and recurring market losses and a variety of expenditure targets depending on circumstances, including matching scheme pension, running the cash flow without the scheme pension at all. If it becomes apparent early on in the analysis that a transfer is not appropriate we may do a simplified report and lower the fee; the reality is that it is rarely that simple, even if the advice is to not transfer.

    If you carry out a 'triage' approach which leads you to conclude that a DB transfer is not in the client's interest, how is that not advice? It may well be that you can conclude this very quickly but I would have thought you would still need to back that up with an appropriate report and supporting file notes/research fact find etc.

    If you provide an education document which talks in general terms about DB v DC schemes risks etc then that is education.

    Bear in mind it is never the regulator who decides these things after the event if they go wrong; it is the FSCS.

    The nature of this work is such that there are no short cuts. It is complex work and requires full analysis to start with along with properly documented conversations with clients to provide any sort of advice.

    It is unlikely that anyone invovled in this is going to get away with not seeing their PI costs rise and / or DB transfer excesses increasing.

  • It's not advice because you aren't making a personal recommendation to transfer the xyz DB pension benefits to the abc personal pension plan invested in the such and such fund.

    You're saying... 

    You have x income need in retirement and this particular type of pension scheme income available to you to meet that objective. It works like this...

    You could swap that pension income for a different type of pension that works like this...

    How do you feel about that? Did you know all of that stuff before you got in touch? I realise that you've come to me for advice on your xyz benefits. I want to make sure that you are in a fully informed position about whether you need that advice before I charge you a lot of money for it. Especially as we might end up recommending that you do nothing. 

    If the client complains that they have been inappropriately advised not to transfer, what is their loss? They started with a deferred entitlement in a DB scheme and they still have it. I think they are more likely to make a successful claim against an adviser who has charged four figures to recommend they keep a DB pension for reasons that were easy to identify right at the start of the relationship. 

    I've asked the Ombudsman service about this aspect but got nowhere sadly. 
    Benjamin Fabi FPFS
    Chartered Financial Planner 
  • richallumrichallum Administrator
    I've spoken to PI brokers and underwriters about this and it's a non-issue for them.  Complaining that the CETV has gone down after you were advised not to transfer (assuming the advice was suitable at the time) is not a valid complaint.

    Paraplanner. F1, Apple, Nutella, ice cream. No trite motivational quotes. Turning a bit northern. Republican.

  • Agree with richallum - CETV falls post advice not to transfer is not an issue, provided the advice not to transfer was correct.

    Benjamin, I may be splitting hairs (sorry) but I do not see how you can say what a client's income need in retirement is without undertaking cash flow / detailed planning. Retirement is never an income need; it is always an expenditure funding need and these are not the same.

    I do agree you can say that a DB provides a (reasonably) certain level of future income compared to a potentially uncertain money purchase option.

    I also agree if a firm provides a detailed generic document of education setting out what a DB scheme is and offers compared to the potentially riskier money purchase transfer alternatives then this is a method of providing information to a client before they embark on incurring fees and as such is not advice; isn't this the role of Pension Wise though?

    Regulated advice on a packaged product includes advising a client not to do something as the non action (i.e not transferring) can lead to a financial loss. As regards the loss on inappropriate advice not to transfer this could be many (hundreds of) thousands of pounds - i.e the full CETV - depending upon the circumstances leading to the complaint.

    I've been doing this for long enough to know that mis selling / retrospective advice standards etc can easily happen, particularly in the complex area of DB transfers. We went through this following the Thatcher era freedoms including contracting out and transferring out of DB scheme when all you could do was invest and then buy an annuity. The risks still exist.

    We are already seeing some conflict between the legislative intention, the Regulator who on one hand wants to alter the advice process (seemingly) through their recent CP alongside the regulator's report which seems to give an impression of mass transfers and withdrawals of funds with hints that they will act to prevent this.

    Overall, in this area of advice particularly it is our role, I believe, as Paraplanners, to assist the adviser in not only providing the correct advice to the client but also to protect the business from future claims as well.

    asking the FOS for an opinion is a waste of time; I'm fairly sure they would neither confirm or deny that the sky was blue to be honest. They remain a law (literally) unto themselves.
  • I'm happy for you to split hairs Richard :smile: We can agree to disagree.

    Benjamin Fabi FPFS
    Chartered Financial Planner 
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