British Airways is to resume its pension transfer activities following a short suspension due to the impact of the coronavirus crisis, Pensions Expert can reveal.
BA’s New Airways Pension Scheme was one of a number of defined benefit schemes to suspend pension transfers in recent weeks due to the impact of the Covid-19 pandemic, after the Pensions Regulator allowed a three-month block on members transferring out of their schemes.
Fraser Smart, chief executive of BA Pensions, told Pensions Expert that the initial decision to suspend the provision of cash equivalent transfer value quotations was made so administrative staff could focus “on completing our transition to remote working and prioritise our essential services”.
BA wrote to scheme members at the time the suspension was enacted, explaining that it would “ensure that we can continue to process our existing pension payments on time, manage new retirements and payments due following the death of our members and pensioners”.
Probably it’s better to be cautious. We haven’t seen any signs as yet of an uptick in scam activity but we suspect it’s out there
Nick Gannon, TPR
With the transition to remote working having been completed, Mr Smart said that “BA Pensions can now recommence the provision of CETV quotations”.
TPR maintains transfer scam warnings
While the news will come as some relief to NAPS scheme members – both as a sign of the health of the scheme and due to the fact that benefits flexibility is restored – individuals are still being encouraged to take a vigilant approach.
Speaking at a Pensions and Lifetime Savings Association webinar on Monday, Nick Gannon, policy lead at TPR, said: “Probably it’s better to be cautious. We haven’t seen any signs as yet of an uptick in scam activity but we suspect it’s out there.”
Against expectations the threat posed by scammers is likely to increase as time goes on, he noted. As the country begins to move out of lockdown and the furlough system starts to wind up, people will be left facing the “reality” of their situation.
“[When] people can’t get back to work or whatever and they start looking for more money, I think thats when scam activity is really likely to kick up,” he said.
Transfer activity falls amid pandemic
So far, overall transfer activity is down during the pandemic, according to a report by XPS Pensions Group, which estimates that the number of completed transfers has fallen to an annualised rate of 0.56 per cent of eligible members, or less than six people in every thousand completing a transfer.
Additionally, requests for transfer value quotations are down more than a third compared with last April.
According to XPS Pension Group partner Mark Barlow, these reductions are attributable to schemes halting transfer activity, as well as the emphasis placed on transfer-associated risk by TPR and the overall air of uncertainty that has contributed to increased caution on the part of scheme members.
BA trustees disembark as destination comes into view
A British Airways defined benefit scheme is shrinking its trustee board size, due to decreased workload after a buy-in and successfully weathering the Covid-19 funding storm.
Commenting on the report, Mr Barlow said: “The regulator’s updated guidance continues to focus on the risks associated with DB transfers, particularly the heightened risk of pension scams in the current environment.”
TPR published a template letter warning about the risks associated with transferring out of DB schemes, which it asks that trustees send to all members requesting a transfer value.
“The joint letter to members will help some to think twice before falling victim to a pension scam, although trustees should not think this is the complete solution,” Mr Barlow said.
Trustees must strike balance between freedom and security
Though a small number of schemes have enacted suspensions on transfer values, these are usually short-term measures, according to Charles Ward, professional trustee at Dalriada, who told Pensions Expert that “if it’s explained properly, we’ve not seen significant concerns or complaints from members”.
He said suspensions are temporary and are in many cases simply a tool used “to buy time to prepare an insufficiency report. The intention in most of those cases is to resume quoting as soon as that information is available.”
The number of suspensions is likely to decrease as markets begin to stabilise, and once lifted the job of schemes and their trustees is to make sure transfer value quotations are “fair and reasonable” and “reflect what’s happened in the market recently”, he added.
“Members have a right to transfer value and regulators are comfortable that should continue, but we need to make sure those are at the right level so the financial security of the scheme is protected.”
While the ability to transfer value is a freedom afforded to members, Mr Ward explained trustees have a duty to strike a balance between members’ freedom and security, by ensuring that members requesting transfer value quotations have taken the proper advice.
“The regulator requires us to make sure members get the two-page letter explaining the risk of taking a transfer in the current circumstances,” he said.
“We need to make sure that’s communicated in transfer value quotations.”
