The Government has loosened minimum advice requirements covering DB to DC pension transfers ahead of radical new freedoms coming into force in April.
Under the coalition’s Freedom and Choice in Pensions reforms, savers who want to move from a DB to a DC scheme in order to take advantage of the flexibilities will be required to take advice. In July, Chancellor George Osborne said this requirement would not apply to people with total pension savings worth less than £30,000.
However, the Government has now proposed relaxing this rule so advice is not mandatory where the transfer value of the DB benefits of the scheme the member is transferring from is below than £30,000.
Speaking during a House of Lords debate yesterday, Liberal Democrat peer Lord Newby said: “In response to feedback from stakeholders, we have decided that [the £30,000 threshold] should apply only to safeguarded benefits in the scheme from which the member intends to transfer, and be calculated on the basis of the cash equivalent transfer value, which is the standard measure in the industry.”
Towers Watson senior consultant Stephen Green says: “Advice can cost the thick end of £1,000, so there was always going to be an exemption for smaller pensions.
“Basing this on the value of the individual pension rather than the individual’s total savings will make the rules a lot easier for trustees to police. It also means that schemes won’t need to prepare transfer value quotations for members who are only interested in transferring a different pension.”