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Fears that pension mobility will lead to dumbing down

The European pensions portability directive could threaten the provision of attractive occupational pension schemes.

The directive, published last October and likely to be implemented in the next two years, is designed to reduce the obstacles to pension mobility caused by occupational scheme rules.

Schemes will be obliged to accept pension transfers from individuals, even if they work for different companies.

As well as the cash value, benefits attaching to the ceding scheme will also be transferred, meaning that a defined-benefit scheme will have to take on the liability of providing the transferred-in benefits.

Standard Life marketing technical manager Andrew Tully says the directive is likely to see employers make their schemes less attractive in the run-up to the NPSS, which flies in the face of the Government’s objective to promote saving prior to any pension reform.

Tully says: “With a lot of other factors, the directive could be damaging to pension reform as it could cause dumbing down. It is likely to add costs to pension schemes and could discourage employers from offering pensions.”

Association of British Insurers head of EU and international affairs Hugh Savill says: “The cumulative affect of various technical disincentives and unintended consequences might make some trustees think that it is no longer possible to provide an occupational pension.”

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