The Government has confirmed pension transfers from defined benefit contracted-out schemes to defined contribution schemes will be allowed following lengthy negotiations with industry.
In the Government response to the consultation on the abolition of contracting out, it says: “We have listened to stakeholders’ views and consider that restricting transfers to the contracted-out environment beyond abolition date would be inconsistent in policy and run counter to our overall pension simplification agenda.
“It would restrict the choice and flexibility that members currently have as to how they manage their pension provision. We also acknowledge the potential risk of creating an artificial transfer market up to 2012.”
DWP also confirms it has introduced “safeguards” to ensure that members are aware of the implications of transferring, in particular that there will no longer be a requirement to provide for survivor benefit post-transfer.
In August, Money Marketing revealed the original drafting of DWP legislation would prohibit transfers from contracted-out DB to DC schemes from 2012. However, following protracted discussions with pensions industry representatives it emerged last week that officials were preparing to announce amendments to draft legislation to allow transfers to continue.