The Department for Work and Pensions (DWP) has launched a consultation on draft regulations to simplify procedures around the bulk transfer of defined contribution (DC) pension arrangements without member consent.
The consultation, which was launched on 26 October 2017 and will run until 30 November 2017, seeks views on the draft Occupational Pension Schemes (Preservation of Benefits) (Amendment) Regulations 2018.
The regulations propose that the need to obtain an actuarial certificate and the scheme relationship condition should both be removed for DC to DC transfers where there are no potentially valuable guarantees or options to be assessed. The regulations also recommend that the automatic-enrolment default fund charge cap protections should be extended to members who are transferred without consent.
The draft regulations also explore ways to maintain member protections. This includes recommendations that pension trustees review the receiving pension scheme if the transfer is not into an authorised scheme, and that trustees should consult with an independent professional. If the transfer is to a scheme authorised under the master trust regime, trustees will still have to maintain their fiduciary duties to act in the best interests of members. The DWP is considering further guidance to be issued on this point.
The DWP expects the draft regulations to come into force from 6 April 2018, subject to Parliamentary approval.
The draft regulations do not cover defined benefit (DB) pension schemes, DC schemes which include guarantees, orphaned schemes or stakeholder schemes.
The consultation is in response to a call for evidence that was conducted between December 2016 and February 2017 by the DWP. This collected feedback on how the provisions on bulk transfers without member consent from DC pensions, in particular from occupational and stakeholder pension schemes, could be improved. The call for evidence received 45 responses.
The consultation is seeking views from pension industry bodies and professionals, trustees or scheme managers, pension scheme members and beneficiaries, employers and representative organisations, and any other interested parties.
Sharon Bellingham, senior consultant at Hymans Robertson, said: “We very much welcome this consultation and few would argue that it’s long overdue. It’s been quite clear that the prevailing requirements are not suited to 21st century DC to DC change; they are very much at odds with the current pensions landscape and direction of travel, an unnecessary hangover, albeit well intended, from the DB world. Where a change is straightforward, technical actuarial input isn’t necessary; it adds costs and an additional layer of complexity.
“However, it’s key that we avoid a free for all. It’s imperative that members’ interests remain protected and are at the heart of decision making. I would expect the further guidance that is due to follow to be in the spirit of assessing value for members. Giving trustees the ability to adopt a pragmatic, meaningful and holistic approach will ensure that decisions are very much aligned to members and will support best possible outcomes at retirement.”