UK - Consultants have hit out at the Pension Regulator's (TPR) tougher stance on enhanced pension transfer values, and accused it of "scaremongering" or at best of being "unhelpful".
In a speech at the National Association of Pension Funds (NAPF) annual trustee conference, David Norgrove, chairman of TPR, told attendees that trustees should start from the presumption that transfer incentives or enhanced transfer exercises "are not in member interests".
He explained that since TPR had produced guidance on inducements in January 2007 "some behaviours are creating concern". These include a number of "worrying tactics" such as:
Norgrove explained: "We hear more discussion in the industry of transfer incentive exercises, and parties including trustees, employers, advisers and even the Ombudsmen have approached us with examples of where such exercises raise concerns. I believe as a matter of policy trustees should start from the presumption that such exercises and transfers are not in member interests."
He suggested trustees could consider withholding data about an individual's transfer valuation from employers to encourage them to scrutinise the offer more closely. Similarly, he argued they should think about how to "influence or supplement" any information being provided, to ensure members have a full understanding of the offer and the risks.
Norgrove warned: "We will look to expose risks and to enable best practice, as we endeavour to educate a trust-based self-regulating pensions industry. However, where behaviours are particularly concerning, we may look to use our anti-avoidance powers."
Paul McGlone, principal and actuary at Aon Consulting, responded toTPR's move by arguing: "UK businesses have enough difficulty dealing with their DB schemes without additional scaremongering about transfer exercises."
He agreed these exercises should be properly conducted but said the discovery of some bad examples should not mean they are all "tarred with the same brush". He added: "It's not for the regulator to determine what is or isn't in a member's interest - that is for them and their IFA. By making comments such as this, the Regulator is just adding to the fear that ordinary people have about pensions."
Paul Jayson, partner at Barnett Waddingham, added: "The regulator seems to be winding up trustees and giving them the ammunition to scupper company initiatives to reduce cost and risk. It's not for David Norgrove to adjudge what's best for 'members' - a completely amorphous and heterogeneous group."
He questioned whether TPR would be willing to offer compensation to members who could have done better by taking a transfer, especially if a scheme subsequently ends up in the PPF and the member's benefits are cut back.
"Norgrove's comments are at best unhelpful and at worst yet another blow to companies, some of whom are fighting for survival in the face of a legacy pension scheme. I am struggling to see how his stance is within the remit of his organisation," said Jayson.
McGlone added: "The offer of a transfer to a member, far from being something that companies dreamed up, is a statutory right - every scheme in the country must make transfers available to its membership. Given that position, why is the regulator then picking on those schemes that offer enhanced transfer values, when there are many that make far less generous offers?"
The comments came as a pension fund survey of 171 schemes, published by HamishWilson ahead of Norgrove's comments, revealed 22% of respondents expect to carry out an enhanced transfer value (ETV) exercise in the next two years, with a further 12% expecting to do after two years. This is compared to just 8% who have carried out the process to date.
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