Employers urged to give staff the facts on pension transfers

Employers offering staff incentives to transfer out of final salary pension scheme have been urged to ensure staff know exactly what benefits they are giving up.

Employers must also make staff aware that the scheme which accepts the transfer value may not provide the same level of benefit, according guidance published by the Pensions Regulator yesterday, which†outlined its concerns about employers hoping to cut their pensions liabilities by offering incentives to members to give up their accrued benefits in a DB scheme. It urged trustees to ensure employers were communicating all the implications of a transfer to their employees, such as making them aware of the financial risks of moving from a low-risk DB environment into a DC scheme where the members bear all the risk.

This follows last week’s Department for Work and Pensions’ decision that transfer values will be calculated based on the expected cost to the scheme of providing the pension.