Regulator exposes risky pension transfer tactics
Thursday, 10 December 2009 12:48
Pension scheme members are being warned their retirement savings could be at risk from employers urging them to transfer out of their fund.
The Pension Regulator today revealed worrying incidents of employers putting pressure on pension scheme members to contract out of their company defined benefit (DB) scheme and into another pension.
It said the recession had led to many pension schemes falling into deficit, forcing employers to reduce liability on their schemes.
But this exercise, the regulator said, was likely to pose a risk to members' benefits.
David Norgrove, chair of the Pensions Regulator, said: "If a company is willing to encourage the transfer, the company's gain is likely to be the member's loss."
He called for greater scrutiny of transfer incentive exercises following reports of 'worrying tactics' being used to make members contract out.
These included employers offering to pay for advice for members, on condition members took that advice.
There were incidents of members being bombarded with emails, phone calls and home visits and there was evidence of trustees putting heavy time pressures on members to make decisions.
Mr Norgrove added: "There may be individual circumstances that lead some individual members to make a transfer decision based on sound rationale and advice - but in general it is unlikely to be in members' interests to transfer out of a DB scheme.
"We believe trustees should engage with such exercises and should ensure that members are aware of the issues."
The regulator said it stood by FSA guidance which states firms should consider these transfers as unsuitable and it urged trustees to be vigilant in exercising their duties.
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