UK - Providers of risk transfer deals in the UK have been urged to adhere to a code of practice to be published next year, or otherwise face the Department for Work and Pensions introducing binding legislation regulating the market.
Speaking at a conference organised by pension administrator RPMI - owner of Railpen Investments, which oversees the assets of the UK's Railway Pension Scheme - Margaret Snowdon, operations director at Lucidia, said aspects of current de-risking strategies were not supported by pensions minister Steve Webb.
Addressing the use of enhanced transfer values (ETVs) and pension increase exchanges (PIEs), she said the increased tax-free cash sum offered to scheme members as part of the latter risk-transfer measure seemed to not sit well with Webb.
She said areas of concern came down to good communication with members involved in such transfers.
She also highlighted a survey conducted by RPMI showing that approximately one-third of respondents - consisting of trustees and other UK pension professionals - do not see PIEs as a good alternative for members, or believe that the approach should never be used.
Snowdon said the code of practice, expected in May next year, should be clear on how best to implement such transfers, stressing that, as these came with free and impartial financial advice for all affected members, sponsors needed to impress on the hired independent financial adviser to offer precisely such unbiased advice.
"Is there a place for cash? The jury is still out on that," she said, noting the temptation cash payments offered, especially in the months before Christmas.
She said that separating the individual transfer deals from the cash payments could be a step in the right direction.
"If it is not handled carefully, then the minister will end up arranging for legislation," she said.
Webb has previously spoken out about the risks posed by PIEs, viewing them as a potential minefield for future generations.
Earlier this year, he told his party conference: "While firms have every right to talk to their workers and ex-workers about getting their pension rights in a different way, we need to make sure people are making well-informed decisions and not losing out on valuable pension rights without realising it."
Snowdon also discussed various other types of risk transfers with the audience, mentioning progressive buyouts - whereby schemes arrange for partial risk transfers on a deal-by-deal basis - but said it was "akin to eating an elephant".
She also warned that trustees should not risk "playing the market" in an effort to clean up their membership data prior to engaging in discussions on any risk transfer deal, suggesting instead that schemes should confess the state of their data in advance and seek to rectify the problem once in negotiations.