DB transfer delays to be met with flexibility from TPR

Defined benefit (DB) pension transfers are likely to take longer amid the coronavirus crisis, according The Pensions Regulator (TPR) chief executive, Charles Counsell.

Counsell stated that coronavirus posed two primary problems for DB scheme transfers, with increased demand for cash equivalent transfer values (CETVs) possibly coinciding with a shortage of staff.

He noted that CETVs may take more time than usual as trustees may wish to revisit the basis upon which they are calculated.

Existing flexibility allows for up to three months to complete CETVs, but Counsell said it will not take enforcement action where trustees have been unable to meet the deadline because of coronavirus-related factors, at least until the end of June.

Considerably less leeway is afforded regarding defined contribution (DC) transfers, with Counsell stating that these transactions should be given priority along with the other core processes during the coronavirus crisis.

Counsell commented that DC pensions are “more vulnerable to market volatility” and added that “if transfers can’t be carried out in good time this risks hardship for members”.

He said, in order to protect people against rushing into decisions they will regret, members who ask for a CETV should be sent a letter with their valuation that warns them “such a move may not be in their best interests and urging them to think carefully”.

“The transfer letter, signed by TPR, the Money and Pensions Service and Financial Conduct Authority (FCA), also shows how savers can be ScamSmart and highlights where they can get support,” said Counsell.

Trustees must also monitor transfer activity from their schemes and notify the FCA if they notice unusual patterns, such as spikes or a multitude of requests from a single member.

Counsell concluded: “In times of volatility and disruption it’s all the more important savers understand a pension remains a good, long-term investment, just as they would need to be confident about any other big investment, such as buying a house.

“If they lose confidence it may make it more likely they may make knee-jerk decisions about their money which may not be in their best interests.”

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