Guidance from the Pensions Regulator on transfers from Defined Benefit (DB) to Defined Contribution (DC) pension schemes.
In April 2015 The Pensions Regulator published guidance aimed at helping trustees of DB schemes manage requests from members of the scheme who wish to transfer to a DC arrangement.
The changes made from 6 April 2015 to DC schemes make these schemes more attractive than they were previously and it was anticipated that more people would choose to transfer from DB schemes to DC schemes.
The guidance covers the following main points for trustees:
Trustees should ensure they have processes in place to implement transfer requests in a timely manner, record all requests received and transfers that have been made.
Where the member’s cash equivalent value of safeguarded benefits in the scheme is £30,000 or less, the member is not required to obtain advice for the purpose of making a transfer. However, trustees must remind the member about the information on transfers available from The Pensions Regulator, The Pensions Advisory Service and the FCA. Trustees must also recommend that the member take advice before deciding whether to transfer, although the member has no obligation to take such advice.
If the exemption in point 2 above is not available (ie the sum exceeds £30,000) then the trustees must check that a member has obtained the appropriate independent advice before transferring the member’s safeguarded benefits to a DC scheme (or a DC section of the same scheme).
Trustees should retain a copy of the adviser’s written confirmation of advice to the member. As the advice is likely to be confidential to the member, trustees should not request a copy of the advice. Similarly they should not prevent the member from making decisions which the trustees might consider to be inappropriate.
Trustees must check that the adviser has the correct permission (as detailed on the Financial Services Register maintained by the FCA) to carry on the regulated activity. If, after carrying out certain checks, the trustees have concerns about the adviser, these should be reported to the FCA.
Trustees should keep a record of the checks undertaken and retain them for at least six years although The Pensions Regulator recommends that they are retained for a longer period.