Trustees can’t refuse DB to DC transfers: TPR

Trustees can’t refuse DB to DC transfers: TPR

Trustees cannot refuse to carry out a transfer request from a defined benefit to a defined contribution scheme if the person has received appropriate advice, The Pensions Regulator has stated in newly published guidance.

From now on, those who wish to transfer out of a DB scheme to access the new pension freedoms must take regulated advice, unless their pot is less than £30,000.

The regulator received 53 responses to its consultation, a number of which queried whether the it had formed an appropriate view on the merits of members transferring their safeguarded benefits.

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Responses suggested that the regulator should not convey that a transfer would be inherently bad, and that taking such a position was unhelpful to trustees who must still carry out a legitimate transfer request, adding that the new pension flexibilities introduced situations where some members would be best served by transferring their benefits.

The regulator’s response was that for the “majority of members” it remains in their financial interest to stay within a DB scheme, although it has updated the overall guidance in light of the comments.

In particular, this noted that trustees cannot prevent a member from transferring where they have a statutory right to transfer one or more categories of their benefits to another scheme.

“We are also clear that there may be situations where it can be in the member’s interest to transfer their benefits or that accessing their benefits may be a higher priority for them than a pension provided by their DB scheme,” it stated.

In its guidance published alongside the consultation, the regulator said that trustees should ensure they have processes in place to implement transfer requests in a timely manner.

The regulator explicitly made clear the distinction between the role of the adviser and the trustee, pointing out that it is not the trustees’ role to second-guess the member’s individual circumstances and choice to transfer their safeguarded benefits.

“It is also not their role to prevent a member from making decisions which the trustees might consider to be inappropriate,” the document read. “In addition, the advice is likely to be confidential to the member. As a result, trustees should not request a copy of the advice the member has received or make enquiries about the substance of the advice.”

The guidance added that their role is to check that the appropriate advice has been obtained by verifying that the adviser’s confirmation meets the legislative requirements.

The regulator also stated that trustees must notify it of transfers more than £1.5m, or if lower, 5 per cent of scheme assets.

This guidance on transfers will be reviewed in 2016 once more evidence is gathered.