Enhanced Transfer Values Explained (ETV's)

Corporations that offer a Defined Benefit Pension to their employees have recently been offering members of their scheme an alternative method of drawing down their pension. A legislation change in June 2016 has allowed this new option to be offered. This option can have some very tangible benefits for both the Company and the member (either a current or deferred member).

Enhanced Transfer Values Explained (ETV's)

Corporations that offer a Defined Benefit Pension to their employees have recently been offering members of their scheme an alternative method of drawing down their pension. A legislation change in June 2016 has allowed this new option to be offered. This option can have some very tangible benefits for both the Company and the member (either a current or deferred member).

Background as to why ETVs are being offered by Companies

Companies with Defined Benefit Pension schemes typically offer their employee

  • a tax free lump sum paid on retirement (usually age 60 or 65) and,
  • an annual pension income that is paid for the rest of their lives on retirement.

Each employee’s pension fund calculations are directly related to their Final Salary and their years of service. The company is promising its employees to pay each member a certain amount of money on retirement for every year that they have worked in their business. The value of the Companies pension fund is irrelevant as the company is obliged to honor this pension promise.

Background as to why ETVs are being offered by Companies

Companies with Defined Benefit Pension schemes typically offer their employee

  • a tax free lump sum paid on retirement (usually age 60 or 65) and,
  • an annual pension income that is paid for the rest of their lives on retirement.

Each employee’s pension fund calculations are directly related to their Final Salary and their years of service. The company is promising its employees to pay each member a certain amount of money on retirement for every year that they have worked in their business. The value of the Companies pension fund is irrelevant as the company is obliged to honor this pension promise.

Would you like to enquire about your Previous Pension?

Would you like to enquire about your Previous Pension?

The Employers risk exposure with Defined Benefit Schemes

The problem with DB schemes for the employers is;

  • With mortality rates increasing, it is uncertain as to how many years the company will have to keep paying the annual pensions to its all of its retired employees?
  • If the overall Company pension scheme fund decreases in value, how will these pensions be paid on an annual basis if the money isn’t in the pension pot?
  • This pension fund is classed as a liability on companies the balance sheet. This can have a negative impact of the share price or market valuation of the company. This becomes a major problem if/when the company decides to prepare themselves for a potential acquisition or buyout as the pension fund can decrease the Net asset Value of the Company.

In order to address these issues many companies, particularly those who wish to prepare for an acquisition or buy-out, have started to offer enhanced transfer values to its employees/ex-employees on their individual pension pots in order to entice them to transfer out of the scheme. This in turn will decrease the company’s liability on their balance sheet.


In summary ETVs give Companies a cost-effective means of materially reducing pension risk and potentially improving their scheme’s funding position. They also give members additional flexibility and choice.

The Employers risk exposure with Defined Benefit Schemes

The problem with DB schemes for the employers is;

  • With mortality rates increasing, it is uncertain as to how many years the company will have to keep paying the annual pensions to its all of its retired employees?
  • If the overall Company pension scheme fund decreases in value, how will these pensions be paid on an annual basis if the money isn’t in the pension pot?
  • This pension fund is classed as a liability on companies the balance sheet. This can have a negative impact of the share price or market valuation of the company. This becomes a major problem if/when the company decides to prepare themselves for a potential acquisition or buyout as the pension fund can decrease the Net asset Value of the Company.

In order to address these issues many companies, particularly those who wish to prepare for an acquisition or buy-out, have started to offer enhanced transfer values to its employees/ex-employees on their individual pension pots in order to entice them to transfer out of the scheme. This in turn will decrease the company’s liability on their balance sheet.


In summary ETVs give Companies a cost-effective means of materially reducing pension risk and potentially improving their scheme’s funding position. They also give members additional flexibility and choice.

How ETV’s work in more details:

The problem with DB schemes for the employers is;

  • Current employees where schemes have ceased to accrue future service benefits, and
  • Deferred members (former employees not yet in receipt of their benefits).

Current employees may be offered the option to transfer to their employer’s defined contribution scheme while deferred members may be able to transfer to another approved pension arrangement.

Typically Transfer values are not lucrative enough to entice employees, especially younger members, to transfer out of the existing DB scheme. To make the transfer option attractive to members, it may be necessary to offer them an Enhanced Transfer Value (ETV).

How ETV’s work in more details:

The problem with DB schemes for the employers is;

  • Current employees where schemes have ceased to accrue future service benefits, and
  • Deferred members (former employees not yet in receipt of their benefits).

Current employees may be offered the option to transfer to their employer’s defined contribution scheme while deferred members may be able to transfer to another approved pension arrangement.

Typically Transfer values are not lucrative enough to entice employees, especially younger members, to transfer out of the existing DB scheme. To make the transfer option attractive to members, it may be necessary to offer them an Enhanced Transfer Value (ETV).

Benefits to the Company and Scheme:

If either a current or ex-employee accepts an ETV, their liabilities are removed from the DB scheme. This, in turn, reduces both the size of the scheme liabilities and the associated risk. ETVs can offer a significant saving against company accounting reserves, scheme funding and ultimate buyout costs. This is why such lucrative Transfer Values are now being offered to members of their scheme.

The ETV also:

  • Extinguishes all future scheme pension risk associated with the member once they transfer from the scheme
  • Reduces accounting funding volatility
  • Reduces the scheme’s long-term operating costs
  • Has a potentially positive impact on financial institutions from a regulatory capital perspective
  • Demonstrates to key stakeholders that pension risk is being managed
  • Reduces future regulatory risk

Benefits for Members:

ETVs have numerous potential benefits for members:

The ETV also:

  • They enable deferred members aged over 50 to access their pension immediately
  • A member may receive a higher tax-free lump sum
  • They enable flexibility in benefit provision and ownership of investment decisions
  • The member receives a higher transfer value than normal
  • Ring-fence members’ assets and removes any risk caused by the scheme or employer g. that the scheme winds up in deficit or benefits are reduced
  • An ETV may be considered to offer good value
  • An ETV may suit the member’s personal circumstances in terms of health, marital status and financial status

If you are a deferred member of a pension scheme and would like to check if you:

1. Have been offered a lucrative transfer value or,

2. Want to request a transfer value for you previous pension

Please don’t hesitate to contact us as we have vast experience in this complex area and can clarify any issues you may have.

Benefits to the Company and Scheme:

If either a current or ex-employee accepts an ETV, their liabilities are removed from the DB scheme. This, in turn, reduces both the size of the scheme liabilities and the associated risk. ETVs can offer a significant saving against company accounting reserves, scheme funding and ultimate buyout costs. This is why such lucrative Transfer Values are now being offered to members of their scheme.

The ETV also:

  • Extinguishes all future scheme pension risk associated with the member once they transfer from the scheme
  • Reduces accounting funding volatility
  • Reduces the scheme’s long-term operating costs
  • Has a potentially positive impact on financial institutions from a regulatory capital perspective
  • Demonstrates to key stakeholders that pension risk is being managed
  • Reduces future regulatory risk

Benefits for Members:

ETVs have numerous potential benefits for members:

The ETV also:

  • They enable deferred members aged over 50 to access their pension immediately
  • A member may receive a higher tax-free lump sum
  • They enable flexibility in benefit provision and ownership of investment decisions
  • The member receives a higher transfer value than normal
  • Ring-fence members’ assets and removes any risk caused by the scheme or employer g. that the scheme winds up in deficit or benefits are reduced
  • An ETV may be considered to offer good value
  • An ETV may suit the member’s personal circumstances in terms of health, marital status and financial status

If you are a deferred member of a pension scheme and would like to check if you:

1. Have been offered a lucrative transfer value or,

2. Want to request a transfer value for you previous pension

Please don’t hesitate to contact us as we have vast experience in this complex area and can clarify any issues you may have.

If you would like to find out more information on the pension services that we offer and get a quotation, please contact us on:


If you would like to find out more information on the pension services that we offer and get a quotation, please contact us on:


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Other Products You Might Be Interested in

Pensions

A pension is a long-term savings plan for your retirement. Unlike a regular savings account, money invested in your pension can earn important tax breaks. When you retire, and look to access to your fund, the benefits can be drawn down in a tax efficient way. The earlier you start your pension, the cheaper it is for you to provide the income you want in retirement.

Public Sector AVCs

We offer AVC Advice for Teachers, Nurses, Doctors, Gardaí, etc, and any other public sector profession. The main reasons civil servants should pay into an AVC is to fund for the maximum tax free lump sum available.

Overseas Pension Transfers Advice

Many Irish residents that worked for over a 5 year period in a foreign country in a full time position leave behind a size-able pension in that country. Legislation changes over the past few years have meant that a large number of these pensions can now be transferred with their owners in one lump sum once they leave this employment.

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Superannuation is the name given to the benefits and entitlements that public sector workers are entitled to.

If you are a public-sector worker, for example a nurse or doctor, teacher or lecturer, a guard or an army officer etc, then you need specialised financial advice as your benefits and entitlements are both complex and unique to other sectors. Our team has vast expertise in the public sector.

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© 2020 Money Maximiser | Money Maximising Advisors Limited is regulated by the Central Bank of Ireland - C154250 | Privacy Policy