UK - The Pensions Regulator (TPR) has been urged not to make any 'last minute changes' to draft guidance on calculating cash equivalent transfer values (CETVs), to trustees time to put a policy in place before the new regulations come into force in October.

The Department for Work and Pensions (DWP) published the final regulations in April on CETVs, including the revelation that it will be the trustees' responsibility to choose the assumptions used for the calculation, rather than the scheme actuary.

However, draft guidance for trustees was only published by TPR at the beginning of August, and following the six-week consultation which closes on 19 September 2008, the final version may not be ready before the 1 October 2008 deadline. (See earlier IPE article: TPR guides on pension transfers)

Aon Consulting has therefore urged TPR not to make any "significant" changes to the guidance to allow trustees to implement a transfer value policy and ensure a "seamless transition from October.

Paul Dooley, senior consultant and actuary at Aon, said: "Whilst it would have been more helpful to trustees for guidance to have been published more quickly after the regulations were finalised, the draft guidance is clear and sensible."

He argued as the draft guidance works and the October deadline gets nearer, "we would discourage the Regulator from making any significant last minute changes to its guidance, which will only inconvenience trustees".

"As the regulations are final, there should be no need for trustees to wait for final guidance before proceeding. Trustees should ensure they have fully considered the relevant areas and have a clear policy in place before 1 October 2008, so there can be a seamless transition to the new regime, with no delays to quotations for members," he added.

However, Bridget Murphy, associate at the law firm Wragge & Co, claimed because the consultation runs until 19 September "the final version will not be ready much before, if not after, 1 October".

As a result, she warned "in view of this, trustees who have already decided how they will proceed may need to revisit matters", while scheme trustees also need to be aware that extra disclosure information needs to be included in a Statement of Entitlement (SOE) - or quote - for the member issued after 1 October, so any standard wording will need to be updated.

Murphy also pointed out trustees "should start thinking about their responsibility to set the assumptions", and start discussions with scheme actuaries now, if they are to meet the October deadline.

In particular, she said the current three-month deadline for providing a member with an SOE still applies, which means for any existing requests - or any received in the next few weeks - trustees will need to determine whether the new requirements will apply, depending on when the SOE is likely to be issued.

Murphy added trustees should also be made aware the new legislation does not allow for a transitional period, although she pointed out "there is some scope for trustees to provide the SOE after the three-month deadline", as they will still have six months from the date of the application to produce the SOE, providing trustees could not meet the original deadline for "reasons beyond their control".

Dooley added: "Bearing in mind the shift in responsibility from actuaries to trustees, trustees should put in place arrangements with their scheme actuaries to monitor their methodology for calculating transfer values, so that it remains reasonable, particularly in turbulent investment markets."

Wragge & Co also confirmed the new regulations will still allow schemes to pay members enhanced transfer values, and suggested the requirement to gain consent from employers "should not pose problems" since the idea for the inducement is likely to have come from the employer anyway.

In addition, Murphy pointed out the additional disclosure requirements on trustees - to recommend members take independent financial advice before accepting a transfer value - "dovetails with TPR's guidance on inducement offers".

Dooley said while employers should be aware that in practice "few members accept transfer values at the minimum level determined by trustees", so employers trying to reduce their scheme liabilities by encouraging transfers "should be focusing on what level of enhanced transfer value will have the desired effect".

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