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Trustees concerned over transfer incentives - TPR

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  • Trustees concerned over transfer incentives - TPR

UK - Trustees were concerned about potential conflicts of interest in a third of cases where schemes have offered members an inducement or incentive to transfer out of the scheme or accept reduced benefits, The Pensions Regulator (TPR) has revealed.

Findings from TPR's 2008 annual governance survey showed 84% of schemes believe the board of trustees manages conflicts of interest effectively, slightly down from 85% in 2007.

The respondents views are "mixed", however, over how conflicts are resolved.

TPR revealed 56% of schemes claimed the board had a means of identifying and recording potential conflicts.

But 44% either do not know or are unsure of the process involved, while just 39% have a specific policy for conflicts of interest and 26% keep and maintain a register of trustees' interests.

The report also showed small and medium sized schemes may have more to do, as only 30% of small schemes and 31% of medium-sized funds have a specific policy on conflicts, while only 18% of medium schemes keep a register of interests.

Meanwhile 5% of DB schemes admitted that the sponsoring employer had offered members an incentive or inducement to either transfer out of the scheme or accept reduced benefits in the last two years.

However in a third of these cases trustees admitted the offer raised concerns for the members' benefits, either because the "cash amount was not enough", or there were issues of fairness to members, in terms of benefit protection or transfer terms.

Four out of five respondents who admitted to concerns about the inducements on offer referred to TPR's online guidance.

The governance survey, which consisted of 500 participants, revealed 65% of schemes have formally assessed the learning needs of trustees in the last 12 months, although the regulator highlighted 30% of schemes had not received any formal assessment or documentation.

In particular the survey found understanding the clearance process - where TPR would undertake not to use its anti-avoidance powers in relation to a corporate activity unless the circumstances changed - created uncertainty among a range of schemes, with 21% admitting to a poor understanding of the process.

However, the findings of the report showed 84% of schemes have service standards in place with their administration provider, although only 15% are linked to financial penalties and 7% are linked to financial rewards.

The number of schemes with in-house administration teams fell over the last 12 months from 18% to just 6%, while the percentage of schemes using third-party administrators increased from 69% to 79%.

Meanwhile, 10% of pension schemes have only one investment fund available, while 12% have more than 20 funds to choose from, with an average number of 14 funds, however 77% of respondents admitted to reviewing investment performance on an annual basis, although among smaller schemes this falls to just 53%.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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