TVC – Not Just a Pretty Picture
Following on from our recent article which delves into the relationship between the APTA and the pension transfer report, O&M's Senior Technical Analyst Peter Pearce explains the need for the TVC to be underpinned by detailed scheme and member data.
A year on from the release of the FCA’s Policy Statement PS18/6 in March 2018, there still seems to be uncertainty amongst pension transfer specialists that all you need to provide advice on occupational pension transfers is a Transfer Value Comparator (TVC) and perhaps a cashflow modelling report. The general notion seems to be that these two reports constitute an Appropriate Pension Transfer Analysis (APTA). If the picture is in the prescribed format and makes a transfer-out look bad, then that’s fine, right?
The TVC is, on the face of it, a simple one page report. The picture presented is designed to say that the member should not transfer their pension. Print off the picture, put it in a frame over the mantle piece and you’ll never need to consider transferring those Defined Benefits again.
But do you know how much effort and detail actually went into creating that picture? It may look right, but does it bear up to closer scrutiny? Is this the only picture you should be looking at, or should you be looking at it in conjunction with other pictures in the gallery?
A SUM OF ITS PARTS
Like a bad sketch it is possible to create a TVC in a few minutes by ignoring the fact that for most members their pension is made up of several different tranches. These tranches will be treated differently, both before and after retirement (eg GMP, Pre 97 Excess, Post 97 Pension, equalised benefits etc). As each element should be valued independently, rather than as a single lump of pension, perhaps a bad sketch is not the way to go?
The information and level of detail required to produce an accurate TVC is the SAME as what is required to produce an accurate full pension transfer analysis report. Evidently you should take more care to produce a TVC that truly reflects the complexity of the benefits being given up which you can then place as part of a much bigger picture within your APTA.
At no point has the FCA stated that a full pension transfer analysis report should not be produced, or that Critical Yields should be ignored. Like an artist creating a masterpiece, when producing your APTA all of the available colours on the palette and all of the brushes need to be used to construct the picture that should be presented to the client.
So do you provide your clients with a quick crayon sketch which ignores much of the finer detail or a well-crafted portrait that is based on the true likeness of the member’s benefits? In such a highly regulated arena there is surely little to argue against the latter?
HOW CAN O&M HELP YOU?
At O&M Pension Solutions we have the tools to provide you with an accurate pension transfer analysis report that includes the TVC along with direct like for like comparisons between what is available from the scheme and what is available on transferring to an individual plan. This includes the TVC, Critical Yields, Cashflow, Capitalised Values, Death Benefit comparisons and a summary of the Data used to produce your report.
If you want to produce this report yourself you can rent our Transvas Profiler software. Alternatively if you would rather rely on our experience and expertise in this field you can subscribe to our Transfer Bureau Service and let us produce the report for you. The choice is entirely yours!
O&M Pension Solutions