Pensions regulator warns on DB inducements

The Pensions Regulator has issued a warning and issued new guidance against the use of inducements in transferring scheme members out of DB schemes.

The warning follows a number of recent stories (link) in which industry watchers have warned of a growing problem ahead.

The regulator’s new guidance boils down to ensuring members are fully informed of any implications of transferring out, and both they and scheme trustees are encouraged to seek independent advice.

TPR says the guidance is to help employers, trustees and members fully understand what the implications of any inducements may be, or the effects of agreeing to any scheme rule changes possibly leading to reduction in benefit.

Tony Hobman, chief executive of the regulator, said: "While we recognise that employers may not break any laws when they offer an inducement, whether it is cash payments or an increased transfer value, we are worried that some transfers are being proposed to avoid an employer's full pension liability.

"Trustees, in particular, have a duty to scheme members to take whatever steps they can to help ensure that members recognise the full impact of what is being asked of them. This should include encouraging members to take independent financial advice and to consider carefully the current and prospective funding position of the scheme."

If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Jonathan Boyd on 020 7484 9769 or email jonathan.boyd@incisivemedia.com.