Pensions Regulator updates advice on transfer incentives

13 July, 2010

The Pensions Regulator has published a consultation paper on guidance for trustees on transfer incentives, supported by an online e-learning module and a joint statement with the Financial Services Authority.

Transfer incentives – such as enhanced transfer value (ETV) exercises – are seen as controversial, since they can ultimately lead to members transferring out of schemes and receiving less than the full amount of benefits.

Some scheme members have also been pressurised by employers into taking transfers when doing so may not be in their best interests.

The guidance states that trustees should start from a position that such exercises and transfers are not in members' best interests and they should approach any exercise with caution.

David Norgrove, chair of the Pensions Regulator said: "As our guidance emphasises, any transfer exercise should be conducted with the highest regard to members' interests.”

"We will be looking closely at exercises and working with other regulatory bodies to ensure that standards are improved. We expect trustees to play an active role in ensuring that members are able to make informed decisions."

Norgrove added the Regulator had seen “behaviour that concerns us”, with exercises “run without due consideration to scheme members”.

In its guidance, 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 that 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.

The guidance is currently open for consultation, with the window for responses open until 5 October. Responses can be submitted online at the Pensions Regulator’s website.