HamishWilson, the specialist pensions adviser, has argued that trustees must review their approach to determining cash equivalent transfer values (CETVs) and whether these continue to represent the expected cost of paying scheme benefits.
Hamish Wilson, Managing Director, advised: “With gilt yields ending the year around 1.3% pa lower than they started and equity markets having lost ground, many schemes will now be underfunded relative to the cost of paying CETVs – if they weren’t already.
“In other words, whilst CETVs hitting record highs is a fantastic opportunity for the member, the flip side is scheme finances are at risk.”
Wilson continued: “As a result of this position, and in the interests of treating all members fairly, trustees need to decide whether they should review the level of underfunding in their scheme. They may then wish to review their approach to CETVs, or increase any reduction already in place.”
