Helping trustees with DB transfers

25 September 2018



Our policy paper helps pension trustees steer the right course in a world of large-scale DB pension transfers.

Few issues divide the pensions’ world like transfers from defined benefit (DB) to defined contribution (DC) schemes.  To help DB pension scheme trustees understand what the law requires of them and what good practice might look like, we’ve joined forces with leading pensions lawyers Eversheds Sutherland to create a new policy paper.

What’s inside?

Read the full policy paper

How much should you tell them? A discussion paper for DB plan trustees

We consider whether trustees should be offering transfer values as part of routine communications, regardless of whether members have asked for them. And what support trustees and employers should offer to members that request a transfer value.

The paper looks at the case for trustees being largely passive and reactive when it comes to transfers, as:

  • The scheme’s rules may indicate that its main purpose is to provide an income in retirement, so trustees shouldn’t go beyond this remit.
  • There may be a risk that trustees could face legal challenge if they actively facilitate transfers that result in poor outcomes for the members. Especially given that regulators presume a transfer won’t be in a member’s interests.
  • There may be a risk that a large volume of transfers could damage the position of remaining members in the scheme, especially in light of The Pensions Regulator’s recent letter to some DB schemes.

We then look at the reasons why trustees may want to go further than the legal minimum:

  • Despite the requirement by regulators that financial advisers should begin assuming against a transfer, there could be some specific circumstances where it would be in a member’s interests. Trustees simply don’t know enough about their members to know if they could benefit from a transfer.
  • Trustees who take no steps to assist members in this area aren’t necessarily immune from legal challenge. Members who get minimal support from their trustees might challenge the lack of engagement on transfers, if a poor outcome is the result. It could be argued that trustees who don’t help members to source good, impartial advice when considering a transfer, aren’t doing the best for them.
  • Considering a transfer is becoming more common in the new ‘freedom and choice’ pensions world. So pro-actively providing transfer value information will help members to make informed choices about their options.

The paper concludes that while there’s no single right answer for all schemes, trustees should be aware that there are legal risks to both approaches. They should recognise that pensions freedoms have changed the pensions landscape in a way that they need to take account of.

Our view

Hundreds of thousands of people have transferred out of their company pension in the last few years having taken impartial financial advice.  Trustees need to engage fully in this process, and shouldn’t make assumptions about what’s right for individual members. Instead they should make sure their members are well informed about their options and equipped to draw on good quality advice before making the decision that’s right for them.

You can read the full policy paper here.

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