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Aon Consulting warns additional DB pension transfer regulation is unnecessary

Additional unnecessary regulation surrounding defined benefit pension transfers could force companies to withdraw the transfer option altogether, according to Aon Consulting.

The warning comes after calls last week for regulating bodies to impose a clear framework for companies offering cash inducements to scheme members transferring out of a scheme.

Aon Consulting principal and actuary Paul McGlone says regulation and guidance on transfers between DB and DC schemes is already closely monitored by bodies such as the FSA and the pensions regulator.

He says: “Calls for further regulation in this area could actually result in a situation where scheme members are worse off because of increased bureaucracy and greater costs, leading to companies finding transfers less palatable to offer.”

McGlone says that all pension schemes have a statutory duty to offer transfer values to members and trustees consider carefully what level of transfer they can reasonably offer.

He says for those companies that want to offer members an option that is over and above what the trustees can offer, they are providing members with additional choice.

He adds: “There should be no pressure on members to accept a transfer from their scheme and in practice most companies will offer to pay for members to receive professional advice from independent financial advisers that are FSA regulated.

“Guidelines and code of practices exist which sponsoring employers, trustees and financial advisers should all comply with. This existing framework serves the purpose of ensuring scheme members get the full picture when evaluating whether transferring out of a scheme is in their interests. The ultimate losers in this situation would be the members of DB schemes who would find a valuable option no longer available.”

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