Pearl Group looks to offload DB liabilities with cash incentives

Insurance giant Phoenix Group is trying to offload a big chunk of its defined-benefit pension liabilities with two controversial de-risking exercises.

The move comes despite repeated warnings from pensions minister Steve Webb (pictured) about firms offering incentives to move staff out of defined-benefit schemes.

This week’s Money Marketing reveals the closed life provider has sent letters to around 10,000 members of the Pearl group staff pension scheme and the Phoenix Life group pension scheme outlining details of a pension increase exchange.

This involves offering a higher level of pension today in return for members sacrificing future statutory inflation increases.

It is also carrying out a cash-incentivised enhanced transfer value exercise for the Phoenix scheme, with 3,200 deferred members set to be offered up to £2,000 in cash as part of a deal to give up their guaranteed DB pension. It is considering a similar exercise for members of the Pearl scheme.

JLT Benefit Solutions will provide phone guidance to members in the PIE exercise and regulated independent financial advice to those who are offered an ETV. This will be paid for by Phoenix.

Phoenix Group director of communications Daniel Godfrey says: “We have been very careful to construct offers that follow The Pensions Regulator and FSA guidelines and to ensure independent advice is offered where necessary. We have done research which indicates that a small cash incentive encourages people to take advice without actually affecting the decision they take.”

Speaking at the NAPF annual conference in Manchester last month, Webb warned that pensions de-risking could be a future mis-selling scandal.

He said he is taking legal advice on ways to stop firms offering “cash bungs” to employees as an incentive to transfer out of a DB scheme.

Webb also voiced concerns about the communications employers are sending to members when undertaking a PIE exercise.