Receiving defined benefit (DB) scheme trustees might wish to consider contacting transferring scheme trustees to ask what steps they are taking to pay cash equivalent transfer value (CETV) top-ups, according to Squire Patton Boggs (SPB).

A blog post by SPB director, Kate Bailey, pointed out that, while only members have a right to bring a claim for a top-up to an unequalised CETV and so receiving scheme trustees cannot make a formal claim, simply making contact could mean that top-ups are paid “sooner rather than later”.

Bailey added that it would also be worth seeking to clarify any changes in scheme name or scheme contact details that have occurred since the transfer, or transfers, took place and to offer assistance to trustees at the other end of transfers.

The firm took this under consideration as it stated that the recent Lloyds judgment had presented trustees with an opportunity to "turn around and look the other way", at CETVs received into their scheme.

Bailey continued: “Depending on the circumstances and the outcome of a cost-benefit analysis, it could be argued that trustees are under a duty to pursue CETV top-ups from transferring schemes, as part of their duty to secure the benefits due under the scheme rules, which is ultimately affected by the scheme’s funding level.

“On the other hand, this is debatable given that receiving scheme trustees have no clear legal entitlement to pursue CETV top-ups.”

Pursuing top-ups from transferring schemes could be a way for receiving scheme trustees of DB schemes to reduce the funding impact of making their own guaranteed minimum pension (GMP) adjustments.

The post went on to question whether schemes might formulate what it referred to as ‘knock for knock’ agreements with each other, where they agreed not to pursue CETV top-ups from one another.

However, Bailey noted that there may not be enough reciprocity between schemes to make these kind of agreements a reality, while there were also questions about how such an agreement could work considering the obligation on transferring scheme trustees to proactively top-up CETVs.

She concluded: “Whilst I think it unlikely that 'knock for knock' agreements will get off the ground, I do predict that there will be increased interaction between DB pension scheme trustees as the practicalities of processing CETV top-ups start to kick in over the coming months.

“Trustees should be mindful that their scheme, along with most other DB pension schemes, is likely to have a dual capacity in being both a transferring scheme and a receiving scheme. Therefore, the trustees who decide to chase top-ups would be wise to do so in a helpful and conciliatory way so that they might be afforded the same approach in return.”

Share Story: