The Pensions Regulator (TPR) has issued revised guidance on pension transfer incentives to make sure trustees are actively involved in managing the risk associated with them.
The incentives, outlined in the guidance published for consultation, include enhanced transfer values (ETVs), which are often offered by employers who want to encourage staff to move from a final salary scheme to a defined contribution (DC) pension.
The revised guidance highlights trustees should start from the presumption that such exercises and transfers are not in members’ interests and should therefore approach any exercise cautiously and actively.
It stipulates that, for transfer exercises to be conducted in an open, fair and transparent way, the regulator expects:
- members to be provided with clear information that is not misleading;
- members to be provided with impartial and independent advice to ensure they make the right decisions;
- trustees to engage in the offer process and apply a high level of scrutiny to all incentive exercises to ensure members’ interests are protected;
- employers to ensure any offers made are consistent with the principles in the guidance; and
- no pressure of any sort to be placed on members to make a decision to accept the offer.
TPR chair David Norgrove said: “Since we published our initial guidance in 2007, we have seen behaviour that concerns us. There has been a box-ticking approach that has led to exercises being run without due consideration to scheme members.
“As a result, we will be looking closely at exercises and working with other regulatory bodies to ensure standards are improved. We expect trustees to play an active role in ensuring members are able to make informed decisions.”
Norgrove added: “The pensions ombudsman will take this guidance into account to determine whether any complaint is upheld. He can then direct trustees or employers to compensate members accordingly.”
The consultation lasts for 12 weeks and responses should be submitted by 5 October 2010.