New UK pension transfer rules come into force
UK – New regulations covering the calculation of pension transfer values came into force today, the government said.
“The amendments will enable transfer values to be adjusted where the scheme is fully funded on a minimum funding requirement basis at the last valuation but is not sufficiently funded to pay full transfer values for all members,” said the Department of Work and Pensions in a statement.
“The intention is that transfer values should be calculated on a basis which is fair to members who choose to transfer out of the scheme and to those who remain,” it added.
The regulations governing the calculation of transfer values for salary-related schemes were issued for consultation from January-March this year.
The amendments come as the Faculty & Institute of Actuaries has issued a revised version of its guidance note on transfer values. GN 11 version 9.0 is an update on version 8.1 which has been in force since April 2001.
The body admits that there is concern among its members that the new guidance prevents them from assessing pensioners at "buy-out" cost because it refers to "cash equivalents".
It says: “The assumptions to be used by the actuary for the purpose of cash equivalents are a matter of judgment for individual actuaries and agreement by the trustees, based on the circumstances of the scheme and the requirements of GN11 and legislation.”
The Occupational Pensions Regulatory Authority says the new amendments mean that the guidance it gave on cash equivalent transfer values in February has now been superseded.
It adds: “If they have not already done so, trustees of affected schemes should discuss the need for a GN11 report with the scheme actuary now, as a matter of urgency.”
Meanwhile, the opposition Conservative Party’s spokesman on pensions, Oliver Heald, has branded the government’s Stakeholder pensions initiative as a “flop”. The products were designed for those on lower incomes, but Heald has pointed to tax data which shows that the average annual contribution to Stakeholder is around 1,300 pounds a year.
A spokeswoman at the DWP "absolutely" denied that Stakeholder has been a flop. She said 46% of sales have been to those earning less than 20,000 pounds a year and that a total of 1.4 million products have been sold.