Trustees warned there are no ‘risk-free’ DB transfer options

Trustees have been warned that there are no ‘risk-free’ responses when it comes to transferring a member’s benefits out of a defined benefit pension scheme.

Analysis from Royal London and Eversheds Sutherland found that although there may not be a hard and fast rule for which course of action to take during a DB transfer, 'doing nothing' is not risk-free.

“When it comes to trustees and pension transfers, there is no ‘risk-free’ response,” said Eversheds Sutherland partner and head of pensions, Francois Barker. “The British Steel case demonstrates the reputational damage which can be done when members are left to find their own sources of advice.

“Trustees who engage with the issue in a properly governed way may well be less exposed than those who do nothing at all."

Alongside Royal London, Eversheds Sutherland have produced guidance to trustees which seeks to provide a ‘roadmap’ of engagement by trustees, ranging from minimal involvement to full engagement, where trustees appoint nominated IFAs for members to use and supervising their performances.

“Whilst there is no one-size-fits-all solution to this dilemma, we hope that this guide will help trustees to judge the right level of involvement in supporting members who may be considering a transfer,” continued Barker.

The report also hopes to provide help for trustees in selecting an IFA firm, including a list of questions which trustees should ask of advice firms seeking to be appointed.

Royal London director of policy, Steve Webb, added: “Despite all of the controversy around this issue, it remains the case that transferring out of a DB pension will the right answer for some people in some circumstances.

“There is much to be said for trustees helping members to access high quality, affordable financial advice to help them to decide if such a transfer is right for them.”

    Share Story:

Recent Stories


De-risking options for pension schemes
In this latest Pensions Age podcast, Linklaters' Sarah Parkin talks to Laura Blows about the wide range of choice available to pensions schemes for the partial, or full, removal of their risks

Risk transfer opportunities
Laura Blows speaks to Lisa Purdy, Head of Fiduciary Distribution at Legal & General Investment Management and Gavin Smith, Pricing and Execution Director - UK PRT at Legal & General, about the impact of the recent market volatility on the bulk annuity and risk transfer market and the potential opportunities for the future

Bulk annuities during coronavirus
Laura Blows speaks to Just business development manager Prash Mehta about the impact of coronavirus on transactions

Investing in infrastructure
Laura Blows speaks to James Dawes about how, and why, pension funds should be looking at infrastructure as an investment opportunity