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  • March 2015
03

IFoA warns of risks in new pension freedoms

Open-access content Thursday 12th March 2015 — updated 5.13pm, Wednesday 29th April 2020

People looking to transfer their defined benefit (DB) pension schemes to defined contribution (DC) schemes need to understand the pros, cons and risks of the choices they make, warns the IFoA.

With the new pension freedoms coming into effect in April 2015, the IFoA said "unscrupulous selling" could see individuals lose their "income of life guarantee" as potential scammers could convince savers to transfer their pensions.

The IFoA said actuaries had "professional responsibilities" when providing advice to employers providing DB schemes, providers of retirement products, individual scheme members, scheme trustees and potential clients.

Desmond Hudson, chair of the IFoA's regulation board, said: "The public should be reassured that actuaries have professional responsibilities when providing advice, as IFoA members have an obligation to observe the principles of The Actuaries' Code in the public interest, which promote confidence in the work of actuaries and the actuarial profession."

In a publication entitled Implications of budget pension changes for pensions and life actuaries, the IFoA said actuaries should speak up to clients, employers or both if a course of action was "unlawful, unethical or improper". 

According to the document, actuaries from life insurers should be aware of the "critical importance" that individuals are informed of "irreversible decisions" about their retirement income, and they should also ensure communication to be "accurate and not misleading".

The IFoA also introduced a number of demands for actuaries advising pension scheme employers and trustees. For example, scheme actuaries should encourage their clients to review transfer value calculation bases "ideally in advance of the reforms taking effect". 

Hudson said: "The IFoA expects its members working in both the pensions and life insurance industries to ensure any advice given is objective and considers all the risks. This includes any advice given to employers providing DB schemes, providers of retirement products, individual scheme members, scheme trustees and potential clients."

This article appeared in our March 2015 issue of The Actuary .
Click here to view this issue

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