Chair of The Pensions Regulator David Norgrove has given a glimpse into the content of the Regulator’s final guidance on enhanced transfer values (ETV) in an address to the National Association of Pension Funds’ annual trustee conference in London.

In his final speech as chair of the Regulator after a six year term, Norgrove said that while it is not TPR’s view that ETVs are always inappropriate, the Regulator urges trustees to take the presumption that transfers are not in members’ best interests as a starting point.

Typically, ETVs offer an incentive for members to leave their defined benefit (DB) pension scheme, in favour of a defined contribution (DC) arrangement.

Norgrove said that members for whom ETVs will be suitable are likely to represent a ‘small proportion’ of all those offered a transfer, though ETVs will be in the member’s best interests in some circumstances.

“They are where a member’s life expectancy is limited; where no dependants will be supported long term by the DB pension; where the member is a sophisticated investor and is specifically looking to balance the risks in a portfolio of retirement benefits; or where the level of benefit is significantly higher than the PPF [Pension Protection Fund] cap and as such would be cut if the schemes entered the PPF,” Norgrove said.

However, Norgrove added that even in these circumstances, trustees should seek satisfaction that allowing a member to transfer will be in the best interests of the remaining members of the scheme. Trustees can help safeguard members by ensuring that transfers are well-run, with ‘members' interests at the forefront.’

Norgrove said that offers involving cash are likely to result in ‘less objective decision-making’ on the part of members, and it can be ‘very difficult’ for them to gauge whether giving up a DB pension promise will be in their best interests long term.

Further, the Regulator has noted some ‘concerning behaviour’ in relation to ETVs.

“…for example where the member is offered advice paid for by the employer but on the condition that members take that advice. We have also seen examples where excessive pressure is placed on members to make a decision, with daily phone calls, emails and even home visits,” Norgrove said.

TPR published guidance on ETVs for consultation in July, and will publish its final guidance this week.

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