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‘Company schemes face 430m hit after A-Day’

A-Day changes to transfer values could cost occupational pension schemes 430m a year and lead to more schemes being closed, warns Killik & Co.

The financial planning firm says a little publicised part of next April’s rule changes mean that employees who leave company schemes must be offered a transfer value or deferred pension, provided they are more than a year away from normal retirement date and have more than three months service.

Under current rules, employers do not have to offer transfer values or refunds to any employee who leaves with less than two years service, meaning they can claw back contributions made on behalf of the ex-employee. The rule change means this clawback period is reduced from two years to three months, which Killik & Co has calculated as potentially costing schemes 430m a year.

Director of financial serv- ices Malcolm Cuthbert says the change will accelerate the move away from defined-benefit schemes towards stakeholder and Sipps.

He says: “Not every occupational pension scheme currently takes advantage of its right to claw back contributions made for a member so these schemes will not be hit by the new regulations but the fact remains that a number of schemes do reclaim earmarked money and these schemes will find the new regime very costly.”

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