Pension transfers are this season’s hot topic in financial services. Pension freedoms combined with record cash equivalent transfer values (CETV’s) have created a surge in the number of people asking about transferring their DB pension scheme to a defined contribution (DC) scheme, so they can access Pension Freedoms1. At the same time, some employers are struggling with the burden the scheme presents to their business, as increased longevity and low gilt yield put pressure on deficit levels.
And one constant I hear from both sides of this equation is a concern over the lack of guidance from the regulators - FCA regulate transfers while TPR regulate the schemes themselves. But this is beginning to change as evidenced by some of the publications which have emerged over the last six months.
In this article, I look at the guidance particular to the schemes themselves and in part 2, I’ll focus on guidance available to advisers.
This report, created in the wake of the BHS scandal and published in December 2016, proposed increasing the TPR’s power and made mention of “Nuclear Deterrents to avoidance”2.
This involves allowing the TPR to levy punitive fines on scheme sponsors of possibly three times what they were due to pay if the sponsor fails to adequately fund the scheme, which results in protracted legal proceedings for the TPR to achieve resolution.
The report also discussed empowering trustees to demand timely information from the sponsoring employer and commented around funding the Pension Protection Fund to incentivise good scheme governance and ensure particular types of employers, including SME’s and mutuals, are not unfairly disadvantaged.
Next came the Green Paper, Security & sustainability in defined benefit pension schemes3, published in February 2017. This focused on four main areas:
Read part 2 next month when Justin will be focussing on the guidance available to advisers.
Business Development Manager
Justin Corliss is a Business Development Manager with Royal London. Justin started his working life in his native Australia where he worked for the Commonwealth Bank of Australia in client facing mortgage roles. Since moving to Scotland in 2002 he has held positions as a broker consultant for both Scottish Widows and Scottish Life dealing predominately with pensions. Before assuming his current role he worked as an Employee Benefits Consultant with a private firm. Justin holds the Chartered Institute of Insurance Advanced Diploma in Financial Services including AF3.