The £1.6bn Superannuation Arrangements of the University of London has decided to suspend members from transferring in their old private sector pensions to manage the risk and cost of regulatory changes, including auto-enrolment.
The multi-employer scheme said the move, effective January 9 2013, was a response to regulatory changes including auto-enrolment, reduced tax relief and anticipated government announcements about guaranteed minimum pension equalisation.
More defined benefit schemes are looking to use transfer suspensions to control the costs and risks imposed by these changes. But the Association of Member-Nominated Trustees has warned schemes not to overreact, highlighting the benefits of greater scale that auto-enrolment can bring.
Penny Green, chief executive at Saul, said: "There is a lot of uncertainty around at the moment. We are nervous about taking on unknown liabilities and risks."
Saul communicated the change to its 11,000 active members through its newsletter, pensions officers and directly with individual members that contacted the scheme.
Green said the scheme wanted to manage the unknown and "disproportionate" risk from the government's anticipated rules on GMP equalisation, data cleansing requirements from the Pensions Regulator and auto-enrolment.
Saul's first employers are due to enrol their workers on March 1. In the six months ending March 2012 the scheme, which is 95 per cent funded, had 25 transfers in from non-private sector organisations.
The suspension of these so-called 'non-club' transfers presents members with a disparity, as those looking to transfer their old pensions within the public sector are not affected, allowing them to put all of their pensions in one place.
Barry McKay, partner at Hymans Robertson, said Saul was one of the first he had seen to suspend transfers, but added it would pave the way for more schemes looking to reduce their future liabilities in view of current scheme changes.
Other options for members who are now barred from transferring were "fairly limited", McKay said. "They could transfer it to the previous employer or some private arrangement."
He added this reduced service could be difficult for members to understand, so it represented a communication challenge for schemes.
John Gray, member of the AMNT, said the move did not seem logical for such a big scheme, and was disproportionate in terms of managing these risks.
He added: "More money means more scale. Saul has shot itself in the foot."
