Defined benefit (DB) pension schemes have been told to warn members that transferring to a defined contribution (DC) scheme during the COVID-19 pandemic is unlikely to be in their long-term interests.
Under guidance published by The Pensions Regulator (TPR), trustees are asked to write to DB members explaining the risks of transferring, and urging them to consider the decision carefully.
COVID-19 is causing market volatility and uncertainty for businesses and personal finances, and TPR said that pension members could be at risk of making knee-jerk decisions which hit their savings.
The guidance also urges trustees to highlight the free, impartial pensions guidance from Pension Wise to members, including phone appointments and online information.
“A decision to transfer a pension pot that’s taken a lifetime to build is a very serious one and we’d urge members to be very, very careful making any transfer decisions at this time,” said TPR chief executive Charles Counsell.
“For the foreseeable future, anyone who is looking to transfer their benefits out of their DB scheme should be sent a new warning letter to make them stop and think as well as point them towards free, impartial guidance.”
The guidance urges trustees to identify the risks of a member deciding to access their pension funds, and to give appropriate warnings of the risks and implications of their chosen option.
They should also send all members requesting a cash equivalent transfer value (CETV) a template letter signed by TPR, the Financial Conduct Authority (FCA) and the Money and Pensions Service.
Moreover, the guidance asks trustees to monitor CETV requests and inform the FCA of unusual or concerning patterns, such as spikes or the same adviser across multitude of requests.
TPR also said that pension scams are rising during the coronavirus crisis, and urged trustees to follow the Pension Scams Industry Group code of good practice.
“We are determined to do all we can to protect savers’ retirements from the unprecedented impact of COVID-19," Counsell added.
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