Close to a fifth of defined benefit schemes have made no changes to the way they inform members of their ability to transfer out of the scheme since the freedom and choice reforms.
The introduction of freedom and choice stoked fears that DB members would transfer out of their scheme to take advantage of the flexibilities and cash in their pension pot.
Some schemes are looking to review their terms and introduce partial transfer rules to reduce the risk of people cashing in their entire pot.
The Institute of Actuaries wrote to scheme actuaries in March this year to say, 'Really you should be encouraging your trustees to review transfer terms'
Matthew Arends, Aon Hewitt
Matthew Arends, partner at consultancy Aon Hewitt, said research among its clients showed 17 per cent had taken no action that was likely to lead to an increase in the number of transfers in future.
Talking about transfers
Most of the schemes – 60 per cent – had changed the wording of the retirement packs to make members aware of the option to transfer, while almost a quarter quoted the transfer value on the pack, with some of these including other details such as annuity rates.
Arends said: “A really important step is making members aware of their options.”
He added that larger schemes were typically the first movers when faced with change.
“My experience is the large schemes tend to act on the new thing in pensions first, and smaller schemes tend to follow them in time,” he said. However, he added: “People who were late movers were more likely to show the transfer value.”
Among the late-moving schemes, more than a quarter thought they would do nothing about freedom and choice.
Arends said: “There’s a risk there of trustees not making their members aware of all the options they have available to them at retirement.”
Most schemes had reviewed their transfer terms, 72 per cent overall. Most of the reviews were not made as a direct result of the Budget, but 25 per cent of the total schemes reviewed their terms in response.
Arends said it was “surprising” some schemes had not reviewed their terms.
“The Institute of Actuaries wrote to scheme actuaries in March this year to say, 'Really you should be encouraging your trustees to review transfer terms'… Looking at terms is a priority.”
Many defined contribution members will also need to transfer out of their scheme to make full use of freedom and choice.
Research released by consultancy Towers Watson last month showed only 43 per cent of employers planned to offer a drawdown option as part of their pension plan.
