Tuesday 18 June 2019

Bonds drive pension transfer value take-up

'Financial advisers say that there is unprecedented value transfer potential in the current low-interest-rate environment. The way transfer values are calculated is closely linked to bond yields' (stock photo)
'Financial advisers say that there is unprecedented value transfer potential in the current low-interest-rate environment. The way transfer values are calculated is closely linked to bond yields' (stock photo)
Samantha McCaughren

Samantha McCaughren

An increasing number of people are opting to take the transfer value of their defined benefit (DB) pensions, rather than rely on monthly payments.

DB pensions have for a long time been seen as sacrosanct. However, financial advisers say that there is unprecedented value transfer potential in the current low-interest-rate environment. The way transfer values are calculated is closely linked to bond yields.

Please log in or register with Independent.ie for free access to this article.

Log In

"In the past, no one would have ever left their defined benefit scheme but there is now a trend for people to take their transfer value," said Declan Hanley, head of lifetime solutions at Davy.

"Everyone has always had the option to take a transfer value and really it was only the very, very rich people who took transfer value as they had other sources of wealth."

"Bond yields are really low, so the transfer value is really high. Somebody who would have 10 years ago got a €1m transfer value for a €50,000 pension, will now get a €1.5m transfer value," said Hanley.

One of the benefits of taking the transfer value is that the money can be passed on to the next generation, unlike a pension which often dies with the individual. However, a transfer is best suited to individuals with generous pension pots and with a few years to go before retirement.

Sunday Indo Business

Also in Business