Fraser Porter: An ‘APTA’ way to do it

Fraser Porter
Fraser Porter

Another big date in the calendar – 1st October 2018. Now you might sit and scratch your head at that one. Don’t worry, I’ll forgive you if you didn’t spot it. This was the date the ‘Appropriate Pension Transfer Analysis’ (APTA) was established. Let me explain.

If you were fortunate enough you may be entitled to a Final Salary pension from your employer at retirement. Whilst the thought of receiving a guaranteed income for life was appealing to many, the changes to pensions have given retirees far more flexibility in how they draw their pensions. Rather than receiving a fixed income in a Final Salary scheme, you have the possible option of transferring out into a flexible pension where you can draw funds as needed. The pull of a transfer was strong for some, so strong that over 100,000 people did just that in 2017 (FT Adviser) and transferred out. But was it for the right reasons?

The much criticised ‘Transfer Value Analysis’ played a key role in assessing the suitability of a pension transfer. Some commentators have suggested this failed to take account of an individual’s circumstances or objectives – all a bit impersonal really. Criticism has also been levelled in the wake of the British Steel transfer saga which saw close to 8,500 workers transfer out of the Final Salary scheme, without perhaps proper appreciation of individual circumstances and the benefits being sacrificed.

This has been tweaked with the introduction of the ‘Transfer Value Comparator’ and an ‘Appropriate Pension Transfer Analysis’, or as they will commonly be referred to – TVC and APTA. Oh we do love an acronym.

The TVC analyses the transfer value offered by the existing scheme against the estimated total value required to replace the clients Final Salary pension income via an annuity purchased from an alternative pension arrangement. A generic estimation only.

But you mentioned APTA I hear you say. Indeed, I did and this is where it all gets that little bit more personal. Details such as marital status, taxation, health, client objectives and needs to name a few are all taken into consideration here, which will help position the TVC in relation to the client’s individual circumstances. Greater emphasis is being placed on understanding the individual, their needs, digging deep to advise, using clear and coherent client information. A welcome change I think you’ll agree, particularly with the events of Port Talbot fresh in everyone’s mind.

When we move past all the baffling jargon and acronyms, it all boils down to one thing, you.  By understanding where you are in life, taking the time to listen to what you want, we start to write on the same page. A crucial part of this is breaking down the barrier that seems to exist between finance and our clients, educating them and sharing our knowledge to help them make better informed decisions. It’s something our advisers do well at AAB Wealth.

It’s a key reason why we’ve enhanced our triage process around Final Salary pension advice with our Money Advice video series. We avoid any unconscious bias and share neutral knowledge on Final Salary pension schemes – the who, what, where, when, and why of Final Salary pensions. It helps you understand the steps you’re taking and the potential implications of staying where you are or transferring away. Only then will we engage, knowing you’re clear on the road you’re going down.

Cashflow modelling plays an important role as standard, taking your financial information and showing you the changing flow of money over your lifetime, using colourful and engaging content. It tends to be the part clients find most interesting – who wouldn’t want to see what their financial future might look like. Invaluable stuff.

So whilst we have a long way to go, I believe the APTA changes strengthen our position as responsible advisers, seeking to serve our clients better. It might not be perfect, but it’s a step in the right direction. One we are taking with two feet.


By Fraser Porter, CEO of Anderson Anderson & Brown Wealth Limited