The Incentive Exercises Monitoring Board has welcomed the clauses in the recent draft Pensions Bill that give the government the ability to prohibit the use of non-pension incentives.

These powers can be used by government if firms fail to follow a voluntary code on incentives such as cash lump sums being used to encourage transfers away from DB pensions.

The pensions industry published a voluntary code last year and the Incentive Exercises Monitoring Board was set up to review the effectiveness of this code.

Pensions Minister Steve Webb said: “I will give the pensions industry’s code of practice every chance of working. However, if the voluntary approach fails to have the desired effect, I will not hesitate to use these powers to stop members of defined benefit schemes being tempted away with incentives like cash lump sums.”

Chairman of the Incentive Exercises Monitoring Board Margaret Snowdon said: “This is a welcome development. The industry has avoided immediate regulation by stepping up to the plate with a voluntary code of practice. It is now vital that the board can demonstrate that the code is working. Let’s show that the pensions industry is committed to good practice and can keep its house in order without government intervention.”

If the code works, the government’s reserve powers will cease to exist after seven years. But if the code is not effective, regulation can be quickly introduced to prohibit such transfers.

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