Alexander Rush, associate in the pensions practice at Stephenson Harwood, has commented on what trustees need to be aware of following HM Treasury’s recent consultation response on pension changes arising from the 2014 Budget.
Rush noted that the consultation suggested that transfers from funded DB-to-DC schemes might be banned, adding that the consultation response firmly dismisses this as a possibility but clarifies that DB pensioners will not have a statutory right to transfer to a DC scheme.
‘The government will provide separate guidance for DB scheme trustees to ensure they are aware of their powers to delay transfer payments that pose a risk to the stability of their scheme,’ said Rush
Additionally, there will be a new duty for DB scheme trustees to direct a member to take advice from an FCA-authorised IFA where he requests a transfer out of the scheme. Rush said: ‘The consultation response alludes to a separate FCA thematic report highlighting examples of good and bad advisory practice in relation to transfer exercises.’
Rush also observed that there will be a new optional statutory override that will enable existing DC and cash balance schemes to offer their members flexible access to their pension savings, without having to amend the scheme rules; the existing statutory right for members of DC and cash balance schemes to transfer their benefits will be enhanced; and a new statutory obligation will be placed on contract-based schemes and trust-based schemes to direct their members to a new guidance service as they approach retirement.
He concluded: ‘The finer details on the above points will be set out in a Pensions Tax Bill and a Pension Schemes Bill, which are likely to be released for technical consultation later this year.’