KPMG research: Enhanced transfer value exercises on the increase

Enhanced transfer value (ETV) exercises are increasingly being offered to members of defined benefit (DB) pension schemes, according to research by KPMG. 

In the past three years, DB scheme members have been offered ETVs to leave their DB schemes, with a further 70,000 expected this year. On average, one in four members typically accept the offer.

The research found that half of all DB schemes are considering an ETV exercise, which would translate to over 2.5 million employees being offered enhanced transfer values.

Mike Smedley, pensions partner at KPMG, said: “ETVs have become a key element of many organisations’ de-risking strategy and our data indicates that their prevalence is going to increase.

“One of the specific concerns raised around ETVs has been about the use of cash and whether scheme members may be lured by superficially attractive deals. 

“The KPMG data shows that take-up rates have been higher when a cash element is included with an average take-up rate of 31%, where members had a cash option and 20% where they did not. This suggests that cash has an influence, but it is difficult to isolate the impact of other factors, which vary by ETV exercise. 

“Even where cash is available, one-third of members choose to keep all of the enhancement in the pension pot rather than take the cash.”

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