In particular:
- The Pensions Regulator can’t actually change the law of the land, so the statutory right to a transfer within set timetables has not changed;
- Trustees may be ‘damned if they do and damned if they don’t’ – specifically:
If trustees slow down transfers and a firm goes bust in the meantime, or transfer value levels fall, a member may get less than they would have done if the transfer had gone ahead;
If trustees go on with transfers, they may find that they give guaranteed transfer values which are way out of line with the true impact of the transfer on the scheme (because of the volatility of markets) and this could damage the interests of remaining members;
If trustees make no changes to the transfer process (even though they could have done) and a member transfers only to see their DC investment perform very badly – or invest in a scam – will they face a complaint, given TPRs new guidance ?
New guidance from the pensions regulator which allows trustees to suspend transfer quotations and payments for up to three months in some circumstances will help schemes to manage the current volatile situation, but nothing in the guidance will change the law of the land.
The new guidance could lead to member challenges as trustees could face challenge from one group of members if they do take advantage of these flexibilities and from others if they do not. It could also make life more difficult for advisers who may find that each pension scheme they are dealing with has responded to the new flexibilities in a different way.
Commenting, Jonathan Camfield, partner at LCP said: ‘The current market volatility means that handling requests for DB transfers is even more challenging for pension schemes than normal, and some will welcome the opportunity to take more time to consider their approach. But the legal situation is complex, with trustees potentially facing challenge whichever route they take. If trustees hold up transfers and transfer value levels fall, or the company goes bust in the meantime, members may complain that they have lost out. But if trustees allow a transfer that they could have delayed, and client investments perform poorly, there may be a different set of challenges. Trying to do right by the members who want to stay in the scheme and by those who want to transfer out will be difficult balancing act in some cases’.
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