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Pearl Group looks to offload DB liabilities with cash incentives

Insurance giant Phoenix Group is trying to offload a big chunk of its defined-benefit pension liabilities with two controversial de-risking exercises.

The move comes despite repeated warnings from pensions minister Steve Webb (pictured) about firms offering incentives to move staff out of defined-benefit schemes.

This week’s Money Marketing reveals the closed life provider has sent letters to around 10,000 members of the Pearl group staff pension scheme and the Phoenix Life group pension scheme outlining details of a pension increase exchange.

This involves offering a higher level of pension today in return for members sacrificing future statutory inflation increases.

It is also carrying out a cash-incentivised enhanced transfer value exercise for the Phoenix scheme, with 3,200 deferred members set to be offered up to £2,000 in cash as part of a deal to give up their guaranteed DB pension. It is considering a similar exercise for members of the Pearl scheme.

JLT Benefit Solutions will provide phone guidance to members in the PIE exercise and regulated independent financial advice to those who are offered an ETV. This will be paid for by Phoenix.

Phoenix Group director of communications Daniel Godfrey says: “We have been very careful to construct offers that follow The Pensions Regulator and FSA guidelines and to ensure independent advice is offered where necessary. We have done research which indicates that a small cash incentive encourages people to take advice without actually affecting the decision they take.”

Speaking at the NAPF annual conference in Manchester last month, Webb warned that pensions de-risking could be a future mis-selling scandal.

He said he is taking legal advice on ways to stop firms offering “cash bungs” to employees as an incentive to transfer out of a DB scheme.

Webb also voiced concerns about the communications employers are sending to members when undertaking a PIE exercise.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. How can JLT provide regulated independent advice when they are in effect acting for Pearl?

    I have seen JLT pop on a number of schemes where the employer is offering enhanced transfer values trying to get members to give up valuable benefits. Maybe the FSA should give them a visit?

    I bet even with the enhanced transfer value the critical yields will be a challenge.

  2. Someone help me understand….What is the benefit of them “offloading” the Defined Benefits? I’m presuming that it will be “in the members interest” and comply with “TCF” regs amongst others!

  3. “Someone help me understand….What is the benefit of them “offloading” the Defined Benefits? I’m presuming that it will be “in the members interest” and comply with “TCF” regs amongst others!”
    That would be a first for Phoenix.

  4. Where does this sit with the bribery act?

  5. lets see what steve webb does now 4th November 2011 at 12:59 pm

    sadly mr webb has been firing from the hip, and lo and behold companies are calling his bluff !

    i am not saying etvs are good or bad, just that i was taught that if you threaten to do something you had better be prepared to carry it out

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