With APTA and TVC not being a requirement until 1^st October 2018, the TVA method could still be used up to the date or even beyond if the firm believes it is valid for the client.

The method and minimum requirements are set by the FCA, which are very similar to the TVC with minor changes in mortality tables and the AIR.

TVA calculates a critical yield needed to produce the same level of benefits that safeguarded pension would have offered.

Another way to explain it is  if the transfer value, less charges, achieves the critical yield from the date of transfer until the retirement date, the resulting pension fund value at retirement will equal the capitalised value of the ceding scheme benefits, if the assumptions in the TVA hold true. Ie the client will be no worse off.

However these are all assumptions and even if the critical yield is achieved, the member may still be worse off or better off as the real values don’t match up with the assumptions.

Changes to any of the assumptions can have big impacts on the critical yield:

• A change in AIR
  • An increase in the AIR will reduce the critical yield
• A change in CPI
  • An increase in the CPI will increase the critical yield
• A change in mortality
  • A decrease in mortality (people live longer) will increase the critical yield