The new switching analysis feature in Synaptic Pathways which provides comprehensive switching analysis as part of a MiFID II, PROD and COBS compliant recommendation has prompted Synaptic bloggers to take an in depth look at pension switching.

Pension advice is the mainstay of financial planning and its success will determine the quality of financial outcomes for clients in retirement. No area of advice is more reliant than pensions on accurate and reliable research to help achieve those outcomes. 

11 Steps to pension switching using one tool and a fully integrated process

  1. Send an automated email to a client inviting them to complete an ATRQ, calculate and identify their risk profile category, the results of which are automatically saved on the system.
  2. Enter a ceding policy, or policies, for consolidation – either manually or using an automated Valuations service.
  3. Create a proposal for the receiving scheme that includes all the research elements required for MiFID II compliance, including illustration of investment outcome to establish suitability and full costs and charges
  4. Offer projections using separate COBS approved methodologies - stochastic projections from Moody’s Analytics and deterministic projections using actuarial growth rates. Manual, multiple growth rates also supported to ensure research can be aligned with any Provider illustrations.
  5. Produce a consolidation report when you are switching more than one pension, including a critical yield calculation and hurdle rate for individual ceding pensions as well as combined values.
  6. Give you the choice of working ‘whole-of- market’ or in alignment with your ‘Central Investment Proposition’, matching PROD compliant investment solutions with target market?
  7. Provide ‘value for money’ calculations including ‘total solution cost’ comparisons based on Reduction in Yield calculations for various platform and / or off platform options?
  8. Based on your client’s specific investment scenario, provide a range of stochastic forecasts detailing all viable investment outcomes presented as probability-based graphs, so that you can file for compliance and proof of suitability, and also share with clients to secure informed consent.
  9. Provide Moody’s Analytics ‘Value at risk’ metrics in order to quantify a client’s Capacity for Loss.
  10. Allow you develop portfolio options that are automatically balanced in-line with a target risk profile.
  11. Give you the option to move seamlessly at any time into a draw down illustration with a cashflow projection including a stochastic calculation for the maximum sustainable income.

Using a tool such as Synaptic Pathways allows you to quickly and simply execute full diligence on a repeatable basis.

Switching analysis includes a ceding and receiving scheme, and supports the creation of pension consolidation reports when multiple pensions are involved. For a brief overview watch the Switching Analysis Video Tour

Find out more about Synaptic's new tool, Pathways with a 30-day Free Trial