DB trustees should avoid illustrative transfer values - Sackers

Defined benefit (DB) scheme trustees should avoid providing illustrative transfer values in their retirement packs or risk falling afoul of proposed Financial Conduct Authority (FCA) requirements, according to Sackers.

A blog post from the pensions specialist law firm highlighted concerns that, in a case where a member of a DB scheme is seeking to transfer to a defined contribution (DC) scheme, providing illustrative transfer values could mean that schemes would “risk straying into the muddy waters of giving advice”.

The FCA’s potential measures are part of proposed changes to advising on pension transfers, which had been the subject of a now-closed consultation over recent months, with a consultation response expected in early 2021.

Savers looking to transfer DB benefits valued at £30,000 or more to a DC scheme are currently required to obtain appropriate independent financial advice, a measure introduced to protect against scams and poor decision-making.

The firm stated that it was worth trustees’ time to check whether their scheme does offer illustrative transfer values as the concept is “increasingly popular and well intentioned”, noting that “some schemes provide a full transfer pack as part of retirement communications, others provide a shorter form illustration”.

Sackers said the issue had been raised with the FCA and commented that “trustees need not make changes to the information they’re giving”, but added that “it’s certainly worth considering the matter now, rather than having to react rapidly in a few months’ time”.

“That said, if your scheme doesn’t already provide such illustrative transfer values, now is not the time to introduce them. Doing so might open trustees up to criticism for going against the direction of travel in this area. If you’ve got such plans, stick them on the backburner for the time being,” said Sackers.

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