The Tax Incentivised Savings Association says the Government would be unable to ban enhanced transfer value exercises within the current legislative framework.
Last month, pensions minister Steve Webb issued a stinging rebuke to firms offering defined-benefit pension scheme members an up-front cash payment to move their savings into a less generous definedcontribution arrangement.
Webb also cited evidence that “a high proportion” of people who are advised not to accept an offer ignore the advice, leading to speculation that ETV exercises could be banned altogether.
Tisa director of policy Malcolm Small says: “It is very tempting for the Government to be prescriptive and say all ETV exercises need to be banned but I do not think it can do that within the framework of existing legislation.
“There are some circumstances where an ETV is a valid approach in terms of safeguarding a scheme’s interests, such as when you have a few very high earning, deferred members who pose a liquidity threat to remaining members.”
A Department for Work and Pensions spokeswoman says officials are “considering options” to tackle the problem.
Hargreaves Lansdown head of advice Danny Cox says: “I would like the FSA to get more involved with ETVs. If it came out with guidance saying it does not like ETVs, then employers and advisers would not want to go anywhere near them.”
Under current rules, pension schemes are entitled to make enhanced offers to members, provided that they are “fair and reasonable”.