People with small defined benefit pensions will be allowed to exchange them for a defined contribution pot without taking financial advice, Treasury minister Lord Newby has said.
The Lib Dem peer was speaking during the report stage of the Pension Schemes Bill in the House of Lords, during which he said advice would only be needed where the transfer value associated with a defined benefit pension exceeds £30,000.
Referring to the part of the bill now being amended, Lord Newby said: “That subsection provides a power to create exemptions to the requirement to check that advice has been received under the advice safeguard.
“In committee we explained that, as set out in the consultation response document Freedom and Choice in Pensions, we intended to exempt those with pensions wealth below £30,000 from having to obtain advice. This remains our only intended use of the exemption.”
Lord Newby also said that the “second line of defence” published by the FCA last week would be extended to trust-based schemes.
He said: “As Lord Bradley pointed out, the FCA will not cover trust-based schemes, but the DWP, which writes the regulations for trust-based schemes, is working with The Pensions Regulator to consider how this can best be dealt with for trust-based schemes on the same basis, so we have it in hand.”
He added that this second line of defence was an important element of the freedoms and not just “another tick-box exercise”.
A spokesman for The Pensions Regulator said: “We will provide guidance to trustees to help them to inform their members about how to access the Pension Wise service, and what they will need to do to comply with the law, as soon as the new legal duties for trustees become clear.”
The Pension Schemes Bill clearly defines categories of scheme to ensure there is a clear shared risk category and to encourage more innovation.
It is expected to have its third reading in the House of Lords on 5 February and, if approved, will become law.
The Taxation of Pensions Act, which includes the upcoming freedoms, became law in December.
William Hunter, director of Edinburgh-based Hunter Wealth Management, said: “I think allowing people to transfer without advice is a good idea because they will be able to access their pots and get a meaningful benefit rather than a tiny annuity.”