Pension Regulator allows defined benefit UK pension transfers to be paused
The UK Pension Regulator’s move to allow defined benefit UK Pension transfers to be paused to handle the coronavirus crisis could create challenges for advisers.
The UK Pension Regulator’s plans to curb the effect of coronavirus on defined benefit schemes will create extra difficulties for advisers as they find that each pension scheme they are dealing with may respond to The Pension Regulator’s new flexibilities in different ways.
The regulator published guidance allowing defined benefit schemes to delay member requests to transfer out of their scheme by up to 3 months.
This was to give trustees more time to calculate cash equivalent transfer values (CETVs) as fluctuating markets have made this more difficult.
However, the guidance from the regulator is not legally binding, the statutory right to a uk pension transfer within set timetables has not changed and clients may complain if they do not get the outcomes they expect.
Also warned the guidance may create a raft of issues for trustees as they balance adviser requests and determine what would be the best outcome for members.
The current market volatility means that handling requests for defined benefit pension transfers is even more challenging for pension schemes than normal, and some will welcome the opportunity to take more time to consider their approach.
The legal situation is complex, with trustees potentially facing challenges whichever direction they take. If trustees hold up transfers and transfer value levels fall, or the company goes bust in the meantime, members may complain that they have lost out.
Conversely, if trustees allow a pension transfer that they could have delayed, and client investments perform poorly, there may be a different set of challenges. Trying to do right by the members who want to stay in the scheme and by those who want to transfer their pension out will be a difficult.