Defined-benefit schemes have unique features, such as a guaranteed income based on a member’s final average salary and independent of investment performance, with all investment risk resting with the employer or fund.

Low interest rates in the UK have caused scheme actuaries to reduce long-term yield expectations and therefore the cost of providing the income stream in retirement has significantly increased,” Hart says.

“This has caused an uplift in transfer values.”

A transfer value is the amount a super scheme will offer for transferring out of a defined-benefit scheme.

Transfer values

Hart gave some case studies showing the difference in transfer values for two Britons who migrated to Australia at different times after 18 years of employment with the same amount in defined-benefit schemes.

The first received a transfer value in 2009 of about $199,000. The alternative was an annual pension of about $11,000, or a yield of about 5.4 per cent. At…

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