Regulator investigating transfers

The Pensions Regulator has launched a consultation into the measure – whereby members are paid to relinquish some or all of their benefit entitlements – and is proposing stringent new guidelines.

One of the regulator’s proposals would require trustees to automatically assume the incentives are not in members’ interests, which could dramatically reduce the scope for derisking defined benefit schemes.

The document warns: “The regulator is seeking to educate and enable best practice through this guidance, but where necessary and appropriate it will enforce the protection of members’ benefits, with statutory powers, including the use of contribution notices and/or financial support directions.”

But Nabarro partner Anne-Marie Winton accused the regulator of underestimating the diligence work trustees already do when considering transfer incentives.

She said: “It is difficult to come to any conclusion other than the regulator is against this type of derisking and sees it as potentially akin to scheme abandonment.

“I am worried the bar is being set so high that it becomes impossible for employers to carry out a transfer exercise without seeking clearance.

“While I can’t quibble with encouraging high standards of practice, there also needs to be an appreciation that derisking exercises are not undertaken lightly by employers or trustees.”