Regulator warns trustees to prioritise pension switches

TPR updated its guidance on Wednesday to remind trustees that switches between defined contribution schemes are a “core financial transaction” and a common way for savers to access their pension funds, which means these transactions should continue to remain a priority throughout the coronavirus crisis.

The regulator’s guidance, published at the end of March, explained that trustees of defined benefit schemes may choose to delay new member requests for transfer quotations by up to three months. But the watchdog stressed that this is not the case for switches between DC schemes, where the valuation of benefits is less complex.

The guidance states that if a member’s pension switch is delayed, and their investments fall in value during that period, then the member’s cash equivalent transfer value will be reduced. 

Therefore it is very important for trustees to process switches within a reasonable timeframe, but they must continue to ensure they have carried out all the necessary due diligence before doing so, according to TPR.

The watchdog has also urged trustees to monitor all pension switching activity from their scheme to remain vigilant on potential scams.

David Fairs, TPR’s executive director of policy, said: “The Covid-19 pandemic has created unprecedented challenges for pension schemes and their members. That’s why we’ve been constantly reviewing and updating our guidance to support trustees and protect savers.

“Our latest guidance should help trustees of DC schemes prioritise what’s most important – such as ensuring DC to DC transfers are completed in a reasonable time, so savers don’t lose out. 

“As well as carrying out their due diligence on transfers, trustees should help protect members by highlighting the risk from scammers in their own communications.”

Pension switching involves moving a DC pot from one provider to another and is different from pension transfers, which see DB pensions being moved into DC schemes.