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| The
first choice for people
in pensions |
| Regulator
issues risk transfer guidance
By Sophie Baker |
| A
new code of practice on the transfer of risk in a changing landscape,
through buy-ins or partial buy-outs, has been published for trustees,
advisers and sponsors by the Pensions Regulator (TPR). The regulator has launched a new part to its Trustee toolkit which explains the details of, and provides guidance on, the transfer of pensions risk to insurers. “In setting the framework for pension risk transfers, we have endeavoured to enable trustees and their sponsors to manage responsibly any transfer of this risk away from sponsor balance sheets,” explained Bill Galvin, executive director for strategic development at TPR. “At all times, where the risk is transferred to another entity, trustees must be certain that there is no reduction in member security. Where the risk is transferred to the individual member, trustees must take all reasonable steps to ensure members understand the risk they are being asked to take on and the value of the benefit they are foregoing.” The module is accompanied by the new code of practice, Circumstances in relation to the material detriment test. The code comes into effect on 30 June 2009, and is designed to protect member benefits and the Pension Protection Fund (PPF). It also allows for intervention by TPR if it sees a transfer vehicle to be inappropriate. TPR has also updated its clearance and abandonment guidance for continued accuracy. Tony Hobman, chief executive of TPR, added: “I hope the new code, guidance and addition to our toolkit will be helpful. “By working in close consultation with the UK pensions industry, we can ensure the right balance between innovation and protection in the UK as the defined benefit landscape changes. This must include a fair and level playing field for all, matched by effective enforcement where necessary.” Hobman added that while employers should not be overly concerned, it is important for them to employ due diligence when they consider transactions that would affect their pension scheme. “Employers must also remember that they can come to the regulator for clearance if they seek certainty.” The guidance has been well received in the industry, with Lane Clark & Peacock (LCP) partner, Clive Wellsteed, commenting: “Having advised on many buyouts and buy-ins we cannot emphasise enough the importance of careful preparation and a proper understanding of the available options in order to achieve a successful transaction. We encourage trustees to sign-up for the new training module and, as the Pensions Regulator suggests, to engage with specialist advisers to understand the opportunities available.” - Pensions Age June 2009
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