A STRENGTHENED position on transfer incentives has been outlined in guidance published for consultation by The Pensions Regulator.
The guidance clarifies the role of the employer and trustee and aims to ensure that trustees become actively involved in managing the risks of such exercises. The guidance is accompanied by a new elearning module and a joint statement with the FSA.
The guidance replaces the “Inducement Offers” guidance published in 2007. It highlights that trustees should start from the presumption that such exercises and transfers are not in members’ interests and should therefore approach any exercise cautiously and actively.
In order for transfer exercises to be conducted in an open, fair and transparent way, the regulator says members must be provided with clear information that is not misleading and impartial and independent advice to ensure they make the right decisions. Trustees should also engage in the offer process and apply a high level of scrutiny to all incentive exercises to ensure members’ interests are protected.
TPR says employers should ensure that any offers made are consistent with the principles in the guidance and no pressure of any sort to be placed on members to make a decision to accept the offer.
TPR chair David Norgrove says: “As our guidance emphasises, any transfer exercise should be conducted with the highest regard to members’ interests.
Trustees should start from the presumption that such exercises are not in members’ interests and should be approached with caution.”
Param Basi, technical pensions director, AWD Chase de Vere, says: “The main problems with ETVs are potential conflicts of interest. There should never be a scenario where an adviser is paid only if they recommend the member transfers away from the pension scheme or is paid more for recommending a transfer. This leads to scheme members getting the wrong advice. “