A firm must:
compare the benefits likely (on reasonable assumptions) to be paid under a defined benefits pension scheme with the benefits afforded by a personal pension scheme or stakeholder pension scheme , before it advises a retail client to transfer out of a defined benefits pension scheme;
ensure that that comparison includes enough information for the client to be able to make an informed decision;
In particular, the comparison should:
take into account all of the retail client's relevant circumstances;
have regard to the benefits and options available under the ceding scheme and the effect of replacing them with the benefits and options under the proposed scheme; and
explain the assumptions on which it is based and the rates of return that would have to be achieved to replicate the benefits being given up.
When a firm compares the benefits likely to be paid under a defined benefits pension scheme with the benefits afforded by a personal pension scheme or stakeholder pension scheme (COBS 19.1.2R (1)), it must:
(a) the annuity interest rate is the intermediate rate of return appropriate for a level or fixed rate of increase annuity in (2COBS 13 Annex 2 3.1R(6))2) or the rate for annuities in payment (if less)
(b) the retail prices index is
(c) the average earnings index and the rate for section 21 orders is
(d) the pre-retirement limited price indexation revaluation is
(e) the post-retirement limited price increases at
or use more cautious assumptions;
calculate the interest rate in deferment; and
have regard to benefits which commence at difference times.
When advising a retail client who is, or is eligible to be, a member of a defined benefits occupational pension scheme whether to transfer or opt-out, a firm should start by assuming that a transfer or opt-out will not be suitable. A firm should only then consider a transfer or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer or opt-out is in the client's best interests.