Cashflow projections for DB transfers

I'm having a discussion with the company's PTS about my cashflow forecast for a DB transfer case. I've stress tested it to give a relatively more realistic picture than a straight 6.2% return which is apparently required by the FCA. I know the stress test should be taken with a pinch of salt, but I can't see how showing a linear 6.2% growth rate can be seen as any more realistic!

Are DB transfers just a 'painting by numbers' exercise in this regard? At the recent Powwow we were discussing cashflow projections where some were saying they use a 25% drop in the portfolio with no recovery.

I'm going to have to change the forecast for the benefit of the PTS to get the case signed off, but I would welcome views from other people who prepare cashflow projections for DB transfers


  • I work with one firm where we use two standard 'alternative market scenarios'

    1. A risk profile weighted crash, with a recovery over three years, that takes place immediately before PCLS and income begin.
    2. A 1.5% reduction to the risk profile relevant deterministic growth rate, in your example 6.2% would be modelled as 4.7%

    This is one way. It's not necessarily how I would do it.

    Benjamin Fabi FPFS
    Chartered Financial Planner 
  • I think, provided you've got some solid research to back up your assumptions, there is no right or wrong way. Provided it's reasonable and reasoned, I think there are many ways you can skin that particular cat. In some circumstances for example a 'chances of success' analysis works and in others a 'how much can you afford to lose' is valid too.

    Outsourced paraplanner for The Paraplanners.  President of the Scottish Petanque Association
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