An industry working group has published a code of practice to guide incentivised transfer exercises such as enhanced value transfers, while Pensions Minister Steve Webb has not ruled out further legislation in future if the voluntary code does not improve outcomes.

The code sets out seven principles that should be followed in making incentivised transfer offers, and describes how the principles should be applied.

Webb said although it is understandable that firms need to manage their pension liabilities, it is important to do it while enabling scheme members to make informed choices about their pensions.

“The practice of offering cash incentives for people to give up valuable salary-related pension rights was a source of particular concern. I therefore very much welcome the work that has been done to come up with an industry code to stamp out bad practice. This new code of practice must be adopted as the standard for all transfer exercises in the future, without exception,” Webb said.

Margaret Snowdon of the Pensions Administration Standards Association and Lucida chaired the group, and said the code has been designed by experts to improve protections for members.

“The principles of the code will ensure that good practice becomes the norm rather than the exception and it will help to restore confidence in incentive exercises as a legitimate liability management tool,” Snowdon said.

The National Association of Pension Funds had representatives on both the working group and steering committee involved in designing the code, and chief executive Joanne Segars said the association strongly supports the code and will help monitor compliance.

“This is a code of practice, not a detailed and prescriptive handbook. It is crucial that everyone complies with the spirit of the code, not just with its specific recommendations. The industry must also realise that if the code doesn’t work then regulation is likely to be the next step – and that is something it should try to avoid,” Segars.

Access the code and accompanying notes here

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